Impacts Of Government Expenditure On The Aging Economy Under Endogenous Growth

Population aging is a painful point of our economy and even the global economy,but this phenomenon did not begin to be paid attention to by modern macroeconomic theory until the end of the last century.Since modern macroeconomic theory was not developed until the beginning of the last century,when the phenomenon of population aging was not obvious in the society,traditional macroeconomic growth theories,such as Keynesian theory and neoclassical economic growth theory,rarely mentioned the problem of "demographic transition".Until near the end of the 20th century,the phenomenon of population aging was significant enough that the population transition began to attract the attention of scholars,and some innovative macroeconomic models for the study of population aging phenomenon appeared.This paper focuses on the mechanism of government expenditure policy under the background of aging.Government expenditure policy is one of the most important policy tools in macroeconomic adjustment.The actual effect of each kind of policy depends on its bottom economic environment.In the new environment of an aging population,the decision-making factors faced by households are very different from the past,which are reflected in the following aspects.Fiscal policy tools that can stimulate economic growth in the past may become weak in the context of aging.If we cannot accurately evaluate the mechanism of government expenditure policy in the context of aging population,it will not be able to maximize the effect of the policy and will easily lead to the waste of financial resources.However,the existing theoretical research has paid little attention to this aspect.Based on the dynamic index(called "aging rate")defined in the existing literature to measure the degree of population aging,a three-sector economic growth model including the role of the government is established.The government expenditure is divided into two kinds:productive expenditure and non-productive expenditure.They are introduced respectively into the production function of manufacturers,and the utility function of the representative households.The mechanism of government expenditure in the age of aging is discussed theoretically.We also compare the conclusions of the model with the traditional economic theory model without the aging situation,and discuss the differences and similarities of the effects of government expenditure policies in the two demographic structure situations.Finally,the results of the model are verified by numerical simulation.The study finds that because of the aging of the population,the effects of government expenditure policies are different in many aspects.First of all,the marginal promotion of government expenditure on economic production and social welfare has been weakened due to the disappearance of demographic dividend,increasing pressure on social support and reduction of consumption power.Secondly,population aging will also lead to an earlier inflection point of the inverted "U" curve(also known as "Barro’s curve")between government spending and social welfare.This means that in the aging society,the space for government expenditure policy will be reduced.This dilemma of "diminishing the effectiveness of policy and narrowing the space for its use" adds difficulties for policy makers.In view of these differences in the mechanism,this paper puts forward a series of suggestions in favor of maximizing the effect of government expenditure policies in the aging society.