A Research On The Relationship Between Government Consumption Expenditure And Economic Growth

Government consumption expenditure is an important part of government expenditure, as well as important means and ways for the government to control macroeconomic regulation, has a close relationship with the economic growth. Government expenditure and economic growth has been the focus of research in the economics, After the eighteenth conference, Chinese government has started to shrink the government’s self-consumption, which will affect the economy.In this paper, first of all, category of the consumption expenditure, and then based on the neoclassical growth model, with the introduction of the government, and divide the government expenditure into consumption expenditure (self-consumption and social consumption), investment expenditure and metastatic expenditure, building a new theoretical model. Then qualitative analysis the relationship between consumption expenditure and economic growth. Found in the long-term equilibrium, consumption expenditure is negatively related to the economic growth, investment spending and economic growth increased first then decreased, there is an optimal expenditure scale, and the scale is decided by the consumption expenditure. In addition, on the premise of consumption expenditure remained constant, changes in self-consumption and social consumption, will not affect the long-term equilibrium, but increase social expenditure can increase the well-being of consumers. So, in the long-term state, reduce the government’s self-consumption will yield a higher output.Then, this paper estimates the parameters of the model, quantitative research to our government consumption expenditure and economic growth. Exogenous parameters after the assignment, can test several conclusions of the theory model, and then found the government in the process of economic growth to the long-term equilibrium, should play the role of a leader, lead the consumers into an equilibrium balanced growth path.Finally, carry on an empirical research about the relationship in1980-2006the consumption expenditure of our government relations and economic growth, found that consumption expenditure is negatively related to the economic growth, and their self-consumption, social consumption on economic growth is negatively related to the economic growth, but the latter two is not significant. In addition, the relationship between investment expenditure and economic growth is not significant, but its form public capital stock and economy are related. That is to say, in the short term, under the premise of insufficient domestic demand in our country, reduce the government’s self-consumption will have a negative effect to economic growth.Combined with the theoretical analysis and empirical results, this paper puts forward the following policy recommendations:under the background of current China’s domestic demand is not prosperous, reduce the government’s self-consumption, will have a negative effect on economic growth in the short term, but can improve the output of the steady state in long term. So the current government should adopt some policies to stimulate domestic demand when they reduce their self-consumption at the same time,;And in the process of economic growth to the long-term equilibrium, The government should play the role of leader, strengthen macro-control, make the economy enter a state of equilibrium and stable growth.