The Effect of Local Government Spending on Regional Economy--Evidence from China's 31 Provinces during 1995-2005

摘要

Prior researches on effect of government spending on economic growth are widespread but not deep. Most of literatures show that government spending exerts positive effect on economic growth. Based on the categories of capital expenditure and recurrent expenditure, this paper finds that different components of government spending will produce different effect on economy. Exactly speaking, recurrent expenditure can improve the economy, while the capital expenditure will worsen it. This conclusion not only justified Zou Hengfu's assertion, but also implies that our local government should change the spending structure, that is to say, we should increase the expenditure in the field of science, education and environment, and at the same time decrease the expenditure in infrastructure and nationowned enterprises reforming. All the data come from china's 31 provinces during 1995-2005.