Research About The Effect Of Public Investment Scale On Economic Growth In Northeast China

Before the 1990 s, the Northeast region developed rapidly with the advantages of its unique natural conditions and resources. With the high speed of reforming, disadvantages of the Northeast region under the planned economy is gradually emerging which severely restricted its development speed. Since 2003, the state raised a series development measures. Re-development of the Northeast region raises more attention. Government-led public investment has become one of its major financial measures at the stages of development. In the background of northeast area revitalization, the study of the effect of public investment scale on economic growth in Northeast China’s is significant.In this paper, the concept and theory of public investment and economic growth were introduced. The promotion, suppression and moderate scale impact of public investment on economic growth are introduced. The paper also summarized the main factors of public investment scale which are regional development strategies, public investment scope and sources of financing.The present situation and the impact of public investment in the northeast region of the economic growth are analyzed based on the selected data of the Northeast public investment and economic growth. This paper selects the panel data of public investment and economic growth in the Northeast from 1993 to 2012, creating the VAR model to analysis the impact of public investment, labor inputs and capital stock on economic growth based on the endogenous growth theory, Cobb- Douglas production function, drawing the conclusion that public investment in the northeast region, the labor inputs and capital stock have a positive effect on economic growth. Granger causality test showed the relationship between public investment and economic growth is two-way. Co integration equation show the contribution of public investment was 31.90%. Calculation of the northeastern region’s optimal scale of public investment was 12.63% of GDP. However, expect some years of historical data, the rate of public investment did not hit 12.63%. That means the Northeast public investment on economic growth has a significant role in promoting, and there is still some room for the increasing.Based on analysis and empirical data, this paper finds the restricted of public investment in promoting economic growth of the Northeast region are. There are a lack of public investment scale and residual the planned economic. The reasons are disadvantages of the regional economic development strategy, unclear public investment scope, single funding channels, governmental functions "offside" and "absence", imperfect public investment management system.In order to optimize its role in improving the growth of economic, this paper proposed to build the Northeast economic support zone, reasonable definition of the scope of public investment, enlarge funding sources, reach a higher reasonable scale of public investment, improving the speed of government transformation and completing public investment management countermeasures.