Fluctuation and Spillover: Poverty Reduction Effect of Rural Public Expenditure Scale Based on Spatial Poverty

Abstract

In rural poverty governance, one of the most significant challenges faced by developing countries is to reduce the negative impact of economic growth fluctuations on poverty reduction, so as to achieve a win-win situation of “economic growth and poverty reduction”. Based on the provincial-level panel data and data of poverty-stricken counties from 2000 to 2016 in China, this paper evaluates the poverty reduction effect of rural public expenditure from the perspectives of cyclical fluctuation and spatial spillover by using the instrumental variable method. It was found that rural public expenditure is pro-cyclical, and after exclusion of the cyclical factors, the essence of fluctuations is still pro-cyclical. Further research also shows that rural public expenditure has a significant spatial spillover effect on poverty reduction, which is even greater than the direct effect. Based on these findings, the policy implications can be that it is critical to provide moderate-scale and stable rural public expenditure, and establish a multi-level and differentiated agricultural insurance system supported by the government. This paper reveals the spatial interaction mechanism between public expenditure and poverty reduction, and also provides reference for correct evaluation of the economic growth and poverty reduction in developing countries.