The Impact Of Local Fiscal Expenditure On Local Economic Development From The Perspective Of Total Factor Productivity

The relationship between local fiscal expenditure and local economic development is always hot topic in economic academic research. And Total Factor Productivity (TFP) growth rate is an important embodiment of economic growth quality. So it has great significance to research the impact of local fiscal expenditure on TFP growth rate which give expression to whether local fiscal expenditure has improved local economic growth quality.In order to study the relationship between local fiscal expenditure and local TFP growth rate more conveniently, first of all, this paper theoretically classifies local fiscal expenditure into physical public goods expenditure, spiritual public goods expenditure and information public goods expenditure, and then analyzes the mechanism of these three kinds of local public goods expenditure impact on TFP growth rate which is by means of capital and labor. After that, in consideration of that there are many factors which could influence TFP growth rate, this paper takes local government off-budget expenditure, local government revenue, non-state economy and foreign trade into account and establishes a dynamic panel data model using Cobb-Douglas production function as the basic framework. I adopted 28 Chinese provinces panel data which date from 2000 to 2008 and DIF GMM (First-Differenced Generalized Method-of-Moments) to estimate this dynamic panel data model and found that:In short term, local spiritual public goods expenditure can remarkably raise TFP growth rate while local physical public goods expenditure and information public goods expenditure have a significantly negative relationship with TFP growth rate; Local government off-budget expenditure could significantly enhance TFP growth rate which is out of my expectation and local government revenue has a negative impact on TFP growth rate; non-state economy has a negative relationship with TFP growth rate which is not statistically significant and foreign trade could enhance TFP growth rate remarkably.And combined effect of long-term is significantly positive, which indicate that these factors can significantly promote the TFP growth rate.These empirical results indicate that:the relationship between local fiscal expenditure and local TFP growth rate could not be simply judged, it depends on the details of local fiscal expenditure, and local government should improve the structure of local fiscal expenditure to enhance local economic growth quality; we should increase the scale and technical level of non-state economy because they could not significantly improve the economic growth quality in China; foreign trade do have a great contribution to improve the quality of Chinese economic development and we should actively expand it.