Total Factor Productivity And Fiscal Expenditure Effect

After the reform and opening up, Chinese economy has developed rapidly. However,as to economic growth, scholars have begun to conduct research on Total FactorProductivity(TFP).The domestic scholars began to focus on Total Factor Productivity atthe time when Paul Krugman, the American economist,believed that the economicgrowth of East Asian courtiers including China is mainly due to vast investment ofeconomic resources rather than production efficiency. He even hold the view that “Nomiracle of East Asia”. The idea of Paul Krugman make it clear that the mode of theeconomy growth needs change, as low-grade Total Factor Productivity means thateconomic growth based on the vast inputs of factors of production such as capitallabor. This is an extensive economic growth path, which doesn’t match the scientificdevelopment obviously. So the transformation of economic growth mode becomesextremely important. The key of this transformation is Total Factor Productivity’simprovement, which can realize by the progress of the Science and Technology, theimprovement of laborer’s quality and the allocation of resources.Of course, thegovernment plays an extremely important role in this process of transformation.This article mainly focuses on how to improve Total Factor Productivity from theperspective of the fiscal expenditure. The results of the research could provide somereference for policy formulation of central government and local government. So thisstudy has important theoretical significance and practical significance. On the basis ofthe existing theory and the study the article analyzes TFP around the relationshipbetween the growth of TFP and the effection of fiscal expenditure.Firstly, the article introduces the development history and the calculation method ofTFP. On the basis of estimation of capital stock, the article also calculates the TFP of thewhole country and all provinces by the growth accounting method and stochasticfrontier method. By comparing the TFP of before and after the reform and opening, it’seasy to see that the TFP of after the reform and opening is lower than before the reformand opening. And we also observe that the TFP of1996-2010is lower than the TFP of1996-2010.Therefore, from the tendency of Chinese current TFC, it is necessary toimprove the country’s TFC to realize sustainable development.Secondly, by building the model of the fiscal expenditure’s scale impact on TFP, thearticle conclude that the scale of the fiscal expenditure have a negative impact on TFP. Then, with using panel data, the article analyzes the model of the fiscal expenditureimpact on TFC of the whole country and different area; the results indicate that theeffect ion varies from different area. And the article also studies the structure of thefiscal expenditure impact on TFP, the analysis shows that the impact of some aspects’expenditure, including public services, education, technology, culture, sports, socialsecurity, health, environment, urban and rural construction vary from area to area. Theimpact is remarkable and positive in the eastern and central regions of China; however,it’s weaker in the western regions. On the basis of practical analysis’s result, the articledraws some conclusions that the TFP is relatively low in China, the fiscal expenditure’sscale have little impact on TFP, the proportion of some aspects’ expenditure which has asignificant influence on TFP is low. Besides, the foreign direct investments havedifferent impact in different regions. In central and eastern regions, the impact issignificant. However, whether from the scale of fiscal expenditure or structure of fiscalexpenditure, whether from a national perspective or from local view, human capitalhave a positive effect on TFP.Lastly, on the basis of theoretical analysis and practical study of this article, thearticle summarizes the reason why the TFP is low.The article also proposes that weshould pay more attention to the expenditure condition of the public service, technologyand education to adjust and optimize the structure of the fiscal expenditure instead ofpursuing the scale of the fiscal expenditure. At the same time, the government shouldgive more support to technology, education and enterprise, thus the TFP will improve,which would transform the mode of the economic growth.