Government Size And Economic Growth In China

Since the reform and opening up in1978, China’s economy has a continued andhigh-speed growth. After the14th National Congress, China proposes the establishment of thesocialist market economic system clearly; giving full play to the basic role of marketresources allocation. In the process of market-oriented reform, market forces are endowedwith greater control and government forces was withdrawn from more and more fields, theresource allocation efficiency is also improved. From some scholars research achievementsabout marketization, China’s marketization degree and the degree of market allocation ofresources in gradually improve, but to improve significantly declined since the21st century.The distribution of state-owned capital is too wide. The government investment scopedefinition is not clear. Excessive administrative intervention is in the field of competitivemarket investment. In the process of economic development and marketization, the degree ofChinese government control of resources has been changing. In the planned economy period,the government plays a leading role in the economy. After the economic system reform, themarket play a fundamental role, the degree of government control of resources is relativelyweak. Then, in China’s current economic situation, how much the government controlresources is reasonable and can promote economic growth effectively. That is the relationshipbetween the size of government and economic growth. For economic growth, whether there isan optimal size of government.In this paper, from theory and empirical research of the relationship between the size ofgovernment and economic growth, the main content is divided into four parts. The first part ismainly the research background and significance of this article, reviewing and summarizingthe relationship between the size of government and economic growth at home and abroadrelated literature. In the second part，relationship between government size and economicgrowth is analyzed in theory, analyzing theoretically that the moderate government scale is anecessary condition for economic growth, further analyzing the impact of governmenteconomic growth and the mechanism of different size of government influence on economicgrowth. There exists a nonlinear Scale inverted u-shaped curve relationship betweengovernment size and economic growth. The third part is the empirical study of relations of government scale and economic growth. In this part of the reference two departments ofproduction model of Ram (1986), using the annual data of1997-2012to do thresholdregression analysis, with Hansen (1996,2002) to test the threshold effect and to estimate theoptimal size of government, providing the empirical basis for the optimal size of government.The fourth part puts forward policy Suggestions to how to optimize the size of government.