A Study On The Effect Of Fiscal Expenditure For Pro-poor Growth

According to the development experiences of many countries, economic growth willnot spontaneously reduce poverty. Trickle-down effect has rarely happened in developingcountries. Therefore, the concept of pro-poor growth was put forward, which means thepoor will benefit from the development more than the rich. As is well-known, under themarket mechanism, there will be market failures, income inequality has increased, andthus resulting in increased social instability.At this point the government should bear themain responsibility. Regulation of financial expenditures is the primary methord, whichhas great significance of pro-poor growth and social development.Expenditure is divided into four parts: management expenditure, constructionexpenditure, guarantee expenditure which is divided into targeted and shared, and otherexpenses on the basis of the direct or indirect effects of financial expenditure on pro-poorgrowth.The country is also divided into Northeast, East, West and Middle according tothe division of the National Bureau of Standards.At first, this paper builds up the specificimpact mechanism from the perspective of economics theories. Secondly, there isempirical analysis, on one hand applying simple least squares regression on the nationaldata, on the other hand using the panel data regression on provincial data. Then the paparconfirms the degree and direction of diffirent expenditure influences and puts forwardsome specific recommendations. Ultimately, the study proves the scale of fiscalexpenditure and management expenditure have native effects on pro-poor growth.Andthen the construction expenditure was not significant in the national regression, but wassignificantly positive in the provincial regression. Education, health and other sharedexpenditure nicely enhance human capital stock, so the impact of pro-poor growth ispositive.Pension, remedies and other types of targeted ganrantee expenditure whichshould promote the interests of the poor, have nagative effect on pro-poor growth actually.The regression results are diffirent in diffirent regions, which the western region is the most significant, and then is the central region; eastern and northeastern regions are least.The above results caused by the following reasons: the long-term economicdevelopment objective is the rapid growth of GDP, fiscal policy overly concern withurban development, the social security audit and implementation mechanism is notperfect, most important expenditure is inefficient, the allocation of resources is imbalanceand so on. As a consequence, this paper puts forward the following suggestions: Firstly,promote the finance reform and rational allocation of public resources and ensure theefficiency of expenditure. Secondly, adjust the structure of fiscal expenditure, improvethe guarantee expenditure ratio and give full play to the functions of different types ofexpenditure. Thirdly, formulate differentiated regional fiscal policy.