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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 Chin    2011, Vol. 6 Issue (2) : 249-270    https://doi.org/10.1007/s11459-011-0131-7
research-article |
Effect of Local Government Expenditure on the Ratio of Output to Capital: Evidence from Panel Data at China’s Provincial Level
Tao Jin(), Jianhui Zhang()
Institute of Economic Research, Xiamen University, Xiamen 361005, China
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Abstract

This paper divides the expenditure of local government into the productive and nonproductive expenditure for revealing the effect of local government’s expenditure on output-capital efficiency through model and empirical analysis. In general, the elasticity of productive expenditure is more than that of nonproductive in a developing country. Therefore, the drawing effect of productive expenditure on economic growth is more than nonproductive one. However, the positive drawing effect of local government’s expenditure on the ratio of output to capital can be displayed only if the expenditure is within a reasonable scale. When the public expenditure has surpassed the limit, there will be a negative influence. Through our empirical analysis on current Chinese economic data, it shows that the positive drawing effect of local government productive expenditure on the ratio of output to capital is remarkable; however, the positive effect of expenditure on economic construction is critically small. In some areas, the government expenditure behavior has indirectly become the economic intervention and it reveals the negative effect and low efficiency in high speed of economic growth. It is imperative for Chinese government to improve the efficiency of economic growth by adjusting the expenditure structure of local government.

Keywords ratio of output to capital      productive expenditure      nonproductive expenditure     
Corresponding Authors: Tao Jin,Email:Jintao834@sina.com; Jianhui Zhang,Email:Zjh1525@yahoo.com.cn   
Issue Date: 05 June 2011
 Cite this article:   
Tao Jin,Jianhui Zhang. Effect of Local Government Expenditure on the Ratio of Output to Capital: Evidence from Panel Data at China’s Provincial Level[J]. Front Econ Chin, 2011, 6(2): 249-270.
 URL:  
http://academic.hep.com.cn/fec/EN/10.1007/s11459-011-0131-7
http://academic.hep.com.cn/fec/EN/Y2011/V6/I2/249
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