The Study Of The Optimal Scale Of Public Investment In China From Provincial Perspective

As an important means of macroeconomic regulation and control of the government, public investment is a hot topic of debate among economic scholars. How the government determines the scale and the allocation of public investment is a very important issue, especially in the context of the current slowdown in economic growth.In this paper, based on the full study of previous research experience, with the panel data of all the provinces in China in 2003-2014, the optimal relative scale of public investment and its sub categories is estimated, and the effect of deviation from the optimal relative scale of public investment and its sub categories is tested. At the same time, taking into account the spatial spillover effects of public investment, a spatial econometric model is constructed to estimate the optimal scale of public investment and its sub categories from the spatial economic perspective. This paper mainly consists of two parts.The first is the estimation of optimal size of the total investment. The problem is analyzed from two perspective, considering the spatial spillover effect of public investment and not considering that. By constructing panel data model, the optimal relative scale of public investment is estimated. Further, considering the spatial spillover in the presence of public investment and economic growth, panel data model is extended to the spatial econometric model to estimate the optimal scale of public investment from the perspective of spatial spillover. Final results show that:(1) the estimated result of optimal public investment 0.3169 from spatial economic perspective is smaller than the model not from spatial economic perspective;(2) the results of the econometric model show that the deviation from the optimal scale of public investment, that is, excessive public investment or public investment will hinder economic growth;(3) public investment and economic growth generate positive economic spatial spillover effect.Second is the estimation of the optimal size of the sub categories of public investment. Public investment is divided into three categories, such as infrastructure construction, education & scientific research and social welfare & public management, then spatial panel econometric model is constructed to estimate the optimal relative scale of public investment in three categories. The results show that the optimal proportion of infrastructure, education & scientific research, social welfare & public management investment in total public investment respectively are 0.6951, 0.1244 and 0.1805. It is also concluded that infrastructure and social welfare & public management investment generate significant positive spatial spillover effect, while the spillover effect of education & scientific research is not significant.