Empirical Analysis of government's Expenditure Structure on Economic Growth

Abstract

The effects of public expenditure on economic growth have been research hotspot all the time. There are two types of public expenditure: productive and consumptive public expenditure. The productive spending is assumed to have positive effect on economic growth, and the other one has negative effect on growth. In China, the total public expenditure is divided into several categories by function including economic construction, social, cultural and educational development, national defense, government administration and others. Usually, people think the first two categories are productive, and the others are consumptive or non-productive. However, by cross section regression analysis, this paper finds that whether a certain kind of public spending is productive or non-productive is not invariable, it depends on the actual situation in different areas. Hence, when local government wants to boost economic growth by adjusting their public expenditure structure, they should be careful enough to determine which kind of spending is beneficial to growth, and then establish policies according to local conditions.