The Scale, Composition Of Fiscal Spending And Local Economy

As "market failure" exists in reality, which requires the government to focus some resources through the provision of public goods and public services to meet public demand, adjust the relationship between fairness and efficiency and improve the efficiency of the market allocation of resources. Government spending has always been a topic of academics, especially in transition economies like China.In this paper, through the establishment of econometric models, we select the financial data of 31 provinces, including total expenditures relative amount, productive expenditures and unproductive expenditures in science, education, culture and health. We use 2005-2006 micro-enterprises data to represent local economy and control firm individual characteristics with registered capital type, size, industry, exports and location. Through statistical analysis and empirical testing, we find that the size of fiscal spending has significant negative effect and productive expenditure has significant positive effect. Spending in science, education, culture and health has a significant negative effect from the short term but accounts for the high quality of human capital in the long term. Besides, we find the effect of productive spending depends on the per capita capital of different firms. Finally, we test these relations in the east, middle and west regions and find a similar conclusion.This paper analyzes the changes in the size and structure of fiscal expenditure in the whole and local governments. We study this theme with micro-enterprise data and this offers a new idea in the research of this field.