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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front. Econ. China    2009, Vol. 4 Issue (4) : 505-525
Research articles |
Government expenditure, taxation and long-run growth
YAN Chengliang1, GONG Liutang2,
1.School of Economics, Central University of Finance and Economics, Beijing 100081, China; 2.Guanghua School of Management, Peking University, Beijing 100871, China;
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Abstract This paper assesses the effect of fiscal policy on economic growth in an AK model with endogenous labor supply. It is found that the structure of taxation and government expenditure could affect the long-run growth rate through their effect on households’ labor-leisure choice, saving-consuming choice and the proportion of government expenditure to GDP. Barro’s (1990) plausible result that the growth rate and the income tax rate have an inverted-U relationship does not always hold. In addition, based on the panel data of 31 provinces from 1997 to 2007, we investigate the link between components of government productive expenditure and economic growth. It is found that the productive expenditure does not always have a positive effect on the growth rate, and its effect exhibits regional differences. The reason is that there is an excess amount of the government productive expenditure in China or the efficiency of the government productive expenditure may be too low.
Keywords economic growth      fiscal policy      taxation      government expenditure      
Issue Date: 05 December 2009
 Cite this article:   
YAN Chengliang,GONG Liutang. Government expenditure, taxation and long-run growth[J]. Front. Econ. China, 2009, 4(4): 505-525.
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