Does Increasing Public Service Expenditure Slow the Long-Term Economic Growth Rate?—Evidence from China

Weize Xiao

doi:10.20965/jaciii.2023.p0761

single-jc.php

« previous

JACIII Vol.27 No.5 pp. 761-770

doi: 10.20965/jaciii.2023.p0761

(2023)

Research Paper:

Views over last 60 days: 136

Does Increasing Public Service Expenditure Slow the Long-Term Economic Growth Rate?—Evidence from China

Weize Xiao

Jilin University
No.2699 Qianjin Street, Changchun, Jilin 130012, China

Received:

January 28, 2023

Accepted:

April 8, 2023

Published:

September 20, 2023

Keywords:

public service expenditure, long-term economic growth rate, panel threshold model

Abstract

Economic downturns have increased in recent years, and the impact of COVID-19 has slowed economic growth. The market’s overall pessimism led to a contraction in the government’s fiscal revenue. The Chinese economy has always relied on government investments. Local governments’ productive investments have directly contributed to capital formation, which has promoted rapid economic growth. With the increase in expenditure pressure and the tightening of income caliber, will the continuous growth of the proportion of public service expenditure affect the established growth goals and hinder the efficiency of economic growth? This study explains this based on a general equilibrium model containing two types of government expenditure and uses China’s 2010–2019 provincial panel data for the empirical analysis. The results show that, in the current economic situation, increasing the proportion of public service expenditure is conducive to further economic growth.

Cite this article as:

W. Xiao, “Does Increasing Public Service Expenditure Slow the Long-Term Economic Growth Rate?—Evidence from China,” J. Adv. Comput. Intell. Intell. Inform., Vol.27 No.5, pp. 761-770, 2023.

Data files:

References

[1] J. E. Tanner, “An Empirical Investigation of Tax Discounting: Comment,” J. of Money, Credit, and Banking, Vol.11, No.2, pp. 214-218, 1979. https://doi.org/10.2307/1991834
[2] R. C. Kormendi, “Government Debt, Government Spending, and Private Sector Behavior,” The American Economic Review, Vol.73, No.5, pp. 994-1010, 1983.
[3] R. C. Kormendi and P. G. Meguire, “Government Debt, Government Spending, and Private-Sector Behavior: Reply,” The American Economic Review, Vol.85, No.5, pp. 1357-1361, 1995.
[4] F. Modigliani and A. G. Sterling, “Government Debt, Government Spending, and Private Sector Behavior: A Further Comment,” The American Economic Review, Vol.80, No.3, pp. 600-603, 1990.
[5] W. Falk et al. (Eds.), “Karl Marx: Capital. A Critical Analysis of Capitalist Production. London 1887,” Max/Engels Gesamtausgabe, Part 2, Vol.9, Dietz Verlag Berlin, 1990.
[6] F. R. Glahe, “Keynes’s the General Theory of Employment, Interest, and Money: A Concordance,” Rowman & Littlefield, 1991.
[7] D. Mei, Z. Wang, and W. Lei, “National Congress of China’s Communist Party, Government Official Administration and China’s Economic Fluctuation,” Economic Research J., Vol.49, No.3, pp. 47-61, 2014 (in Chinese).
[8] Y. Hong, X. Lyu, and L. Li, “Are There Threshold Effects of People’s Livelihood Finance on Resident’s Consumption Under the Constraint of Crossing Middle Income Trap?,” J. of Central University of Finance & Economics, Vol.2017, No.5, pp. 12-29, 2017 (in Chinese).
[9] H. Liu, “People’s Well-Being Financial Expenditure, Population Migration and Economic Growth—An Empirical Analysis Based on Nonlinear Panel Threshold Model,” J. of Guizhou University of Finance and Economics, Vol.2018, No.1, pp. 13-24, 2018 (in Chinese).
[10] X. Li, C. Jiang, and L. Hu, “The Impact of Public Service Expenditures on Chinese Household Multidimensional Poverty,” The J. of Quantitative & Technical Economics, Vol.36, No.11, pp. 160-177, 2019 (in Chinese). https://doi.org/10.13653/j.cnki.jqte.2019.11.009
[11] D. Landau, “Government Expenditure and Economic Growth: A Cross-Country Study,” Southern Economic J., Vol.49, No.3, pp. 783-792, 1983. https://doi.org/10.2307/1058716
[12] D. A. Aschauer, “Is Public Expenditure Productive?,” J. of Monetary Economics, Vol.23, No.2, pp. 177-200, 1989. https://doi.org/10.1016/0304-3932(89)90047-0
[13] S. Wang, “Fiscal Expenditure Size and Structural Optimization: An Analysis Based on Economic Growth Perspective,” Statistics & Decision, Vol.37, No.19, pp. 149-152, 2021 (in Chinese). https://doi.org/10.13546/j.cnki.tjyjc.2021.19.033
[14] Y. Li, “Government Spending, Industrial Structure and Economic Growth,” J. of Zhongnan University of Economics and Law, Vol.2019, No.1, pp. 109-117+160, 2019 (in Chinese). https://doi.org/10.19639/j.cnki.issn1003-5230.2019.0011
[15] F. Tournemaine and C. Tsoukis, “Public Expenditures, Growth, and Distribution in a Mixed Regime of Education with a Status Motive,” J. of Public Economic Theory, Vol.17, No.5, pp. 673-701, 2015. https://doi.org/10.1111/jpet.12099
[16] B. Atems, “Public Health Expenditures,Taxation, and Growth,” Health Economics, Vol.28, No.9, pp. 1146-1150, 2019. https://doi.org/10.1002/hec.3894
[17] S. Devarajan, V. Swaroop, and H. Zou, “The Composition of Public Expenditure and Economic Growth,” J. of Monetary Economics, Vol.37, No.2, pp. 313-344, 1996. https://doi.org/10.1016/S0304-3932(96)90039-2

This article is published under a Creative Commons Attribution-NoDerivatives 4.0 Internationa License.

[1] [1] J. E. Tanner, “An Empirical Investigation of Tax Discounting: Comment,” J. of Money, Credit, and Banking, Vol.11, No.2, pp. 214-218, 1979. https://doi.org/10.2307/1991834

[2] [2] R. C. Kormendi, “Government Debt, Government Spending, and Private Sector Behavior,” The American Economic Review, Vol.73, No.5, pp. 994-1010, 1983.

[3] [3] R. C. Kormendi and P. G. Meguire, “Government Debt, Government Spending, and Private-Sector Behavior: Reply,” The American Economic Review, Vol.85, No.5, pp. 1357-1361, 1995.

[4] [4] F. Modigliani and A. G. Sterling, “Government Debt, Government Spending, and Private Sector Behavior: A Further Comment,” The American Economic Review, Vol.80, No.3, pp. 600-603, 1990.

[5] [5] W. Falk et al. (Eds.), “Karl Marx: Capital. A Critical Analysis of Capitalist Production. London 1887,” Max/Engels Gesamtausgabe, Part 2, Vol.9, Dietz Verlag Berlin, 1990.

[6] [6] F. R. Glahe, “Keynes’s the General Theory of Employment, Interest, and Money: A Concordance,” Rowman & Littlefield, 1991.

[7] [7] D. Mei, Z. Wang, and W. Lei, “National Congress of China’s Communist Party, Government Official Administration and China’s Economic Fluctuation,” Economic Research J., Vol.49, No.3, pp. 47-61, 2014 (in Chinese).

[8] [8] Y. Hong, X. Lyu, and L. Li, “Are There Threshold Effects of People’s Livelihood Finance on Resident’s Consumption Under the Constraint of Crossing Middle Income Trap?,” J. of Central University of Finance & Economics, Vol.2017, No.5, pp. 12-29, 2017 (in Chinese).

[9] [9] H. Liu, “People’s Well-Being Financial Expenditure, Population Migration and Economic Growth—An Empirical Analysis Based on Nonlinear Panel Threshold Model,” J. of Guizhou University of Finance and Economics, Vol.2018, No.1, pp. 13-24, 2018 (in Chinese).

[10] [10] X. Li, C. Jiang, and L. Hu, “The Impact of Public Service Expenditures on Chinese Household Multidimensional Poverty,” The J. of Quantitative & Technical Economics, Vol.36, No.11, pp. 160-177, 2019 (in Chinese). https://doi.org/10.13653/j.cnki.jqte.2019.11.009

[11] [11] D. Landau, “Government Expenditure and Economic Growth: A Cross-Country Study,” Southern Economic J., Vol.49, No.3, pp. 783-792, 1983. https://doi.org/10.2307/1058716

[12] [12] D. A. Aschauer, “Is Public Expenditure Productive?,” J. of Monetary Economics, Vol.23, No.2, pp. 177-200, 1989. https://doi.org/10.1016/0304-3932(89)90047-0

[13] [13] S. Wang, “Fiscal Expenditure Size and Structural Optimization: An Analysis Based on Economic Growth Perspective,” Statistics & Decision, Vol.37, No.19, pp. 149-152, 2021 (in Chinese). https://doi.org/10.13546/j.cnki.tjyjc.2021.19.033

[14] [14] Y. Li, “Government Spending, Industrial Structure and Economic Growth,” J. of Zhongnan University of Economics and Law, Vol.2019, No.1, pp. 109-117+160, 2019 (in Chinese). https://doi.org/10.19639/j.cnki.issn1003-5230.2019.0011

[15] [15] F. Tournemaine and C. Tsoukis, “Public Expenditures, Growth, and Distribution in a Mixed Regime of Education with a Status Motive,” J. of Public Economic Theory, Vol.17, No.5, pp. 673-701, 2015. https://doi.org/10.1111/jpet.12099

[16] [16] B. Atems, “Public Health Expenditures,Taxation, and Growth,” Health Economics, Vol.28, No.9, pp. 1146-1150, 2019. https://doi.org/10.1002/hec.3894

[17] [17] S. Devarajan, V. Swaroop, and H. Zou, “The Composition of Public Expenditure and Economic Growth,” J. of Monetary Economics, Vol.37, No.2, pp. 313-344, 1996. https://doi.org/10.1016/S0304-3932(96)90039-2