Trade Openness,Foreign Investment And Research On The Scale Of Public Expenditure Of The Government

The reform speed up China’s transition from the "planned economy" to "market economy",along with the gradual implementation of the reform of the tax system,and economic system reform with market competition for foreign capital to enter the government fiscal decentralization... And the gradual opening of trade means the external risk gradually into the country and increase trade risk, lead to social instability factors,such as unemployment increases: frequent phenomenon, big labor mobility,the supply and demand of social instability, which requires the government to provide more social security, social welfare policy,subsidies to foreign trade openness, ironing the impact of the market into the Chinese,and safeguard social and economic stability, which eventually led to the expansion of the scale of government public expenditure.On the other hand, with the economic growth and tax increases as the performance assessment criteria, which attracts government officials to the economic development of "trophy competition" to get foreign investment,such as lower interest rates,improve the infrastructure construction level,to give tax breaks,which inevitably resulted in the decrease of public finance income of the government,and caused the scale of public expenditure of government reduce. These two mechanisms about how to change the scale of public expenditure of the government has not yet finalized. Based on the analysis of "compensation hypothesis" and "efficiency hypothesis", combined with the China trade openness, foreign investment into the specific circumstances of the 1978 to 2013 provincial panel data,constructs a dynamic panel data model and the differential GMM model,fixed effect model were tested the trade openness, foreign investment and public finance the scale of government expenditure.Combined with the results of empirical analysis, this paper put forward the effective reform and adjustment ofgovernment expenditure scale and structure of trade, countermeasures and suggestions to promote the healthy and sustainable development of economy.