Study On The Effects Of Trade Openness On Government Expenditure Size

With the international and domestic environment increasingly open and the global economic situation increasingly volatile, in response to economic fluctuation that may caused by external disturbing factors were introduced into China in the process of trade openness, the government needs to make good use of its economic management functions to appropriately reform and reasonablely arrange government expenditure scale.At the theoritical level, based on the theory of "compensation" and "efficiency", this paper analyses the relationship between government spending scale and trade openness. The theory of "compensation" explains a positive correlation between them, because the government coped with the influence of external risk by increasing compensatory expenditure. The theory of "efficiency" explains the negative correlation between then, because the government lays particular stress on the market efficiency. Then, by studying internal mechanism of the impact of government spending scale, this paper illustrates trade openness will affect public products and public security through the elasticity of substitution of commodity in different areas. And based on the model in Rodrik (1998), this paper constructs theoretical framework on the impact of trade openness on government expenditure scale.At the empirical level, this paper adopts fixed effect model, the difference of generalized moment estimation method and the system of generalized moment estimation method, using 1995-2011 national data of import and export trade and government spending, at the regional level and structure level, and empirically researches the situation of the country and its three big areas and scale of government spending which is mainly subdivided subjects. According to the result of empirical analysis, the conclusions are following:at the regional level, the relationship of China’s trade openness and the size of government spending is shaped nonlinear of "U", in line with the theory of "compensation", the relationship between them in the coastal and western regions is shaped negative linear, but respectively conforms to the theory of "efficiency" and "compensation", the central region is in line with the national situation. At the structure level, the improvement of trade openness level biased impacts on the Chinese government expenditure structure, and government spending presents significant time characteristics of path dependence.Based on the above theory and empirical results, the following revelations are put forward. While improving the structure of fiscal expenditure, the government should ensure the coordination of the fiscal policy. The government should ensure the rationality and scientific nature of the annual budget, in order to make its future fiscal policy can continue at a reasonable scale. Government expenditure structure optimization should be stable with the income level of resident, dissolve the risk of foreign economic relations and trade together, pay attention to the vertical shift of the transfer payment system, and pay attention to the role of regional horizontal transfer payment system. Hopes that our country can, in the backdrop of the transformation of economic development, realize structural efficient allocation the scale of government spending between regions, to maintain the continued healthy and stable economic growth in China.