The Impact Of China’s Government Human Capital Investment On Residents’ Consumption

Since the reform and opening up, China’s economic construction has made great achievements that capture the world attention, but the household consumption expenditure is relatively small. In reality, the traditional high investment or export-driven economy is hard to fit to our national condition and power our sustained and rapid economic growth. Human capital as a new production factor gradually influences the economic development, becoming one of key factors that influence the household consumption expenditure. Human capital investment consists of government, individual and enterprise investment. The process of investment is vulnerable to market failure due to the externality of human capital investment. To avoid it, government marco-control is needed. To some extent, the risk can be circumvented and the allocation of human capital resources can be optimized if government involves in human capital investment. In late years, government continuously adds to the investment in education and medical care, in order to stimulate the consumers’ demand. Therefore, the lived meaning of China’s development of human capital investment and consumption spending can be observed by examining the influence of government human capital investment on China’s household consumption expenditure.This paper analyzes and testifies the way that government human capital investment influences household consumption expenditure for the orientation of improving the government human capital investment and increasing the consumption level. First, it does a theoretical analysis of the influence of China’s human capital investment on household consumption expenditure; second, it introduces in details to the current development of Chinese government human capital investment; third, it selects 1992-2013 national annual data as the study sample, in which Time Series Model and VAR Model are based, and examines the way that government human capital investment influences household consumption expenditure; in the end, a policy of government human capital expenditure is suggested for the purpose of increasing China’s household consumption expenditure.According to the outcome of empirical study, it is observed that government human capital investment(human capital investment in education and human capital investment in health) has a crowding-in effect on household consumption expenditure. Further, income, income gap and age structure of population are key factors that influence the level of household consumption expenditure; in path analysis, the finding shows that government human capital investment can influence household consumption expenditure by increasing the residents’ income, narrowing down the income gap and soliciting private human capital. Based on the outcome of empirical study, this paper suggests a policy on increasing the government human capital expenditure, improving the efficiency of government human capital expenditure and developing relevant mechanisms, in an attempt to increase the household consumption expenditure.