Shandong Provincial Government's Purchase Estimate And Its Impact On Consumption In The New Urbanization Process

Consumption is the sole end and purpose for all production in long-term. Consumption is affected by government purchase. the consumption rate of Shandong province is very low since 1978,which is not conducive to economic stability and improving living standards. One of the purpose of “The new urbanization planning from 2014 to 2020 of Shandong province” is to expand consumption. But there are two problems. First, the completion of the new urbanization goals requires matching government purchase. Second,there is no consistent conclusion whether the government will increase consumption. Therefore,this study estimates the scale of government purchase in the background of the new urbanization and analyze whether the relationship of government purchase and consumption is alternative or complementary.Using econometric techniques to estimate the government purchase under the new urbanization background. The relationship between urbanization rate and government purchases in Shandong province is analyzed in a VAR framework by two empirical approaches, variance decomposition and Granger causality test, an prediction of purchase scale over the period from 2014 to 2020 is also made. The results show that the relationship between urbanization rate and government purchase in Shandong province is significantly positive. In order to achieve the new urbanization goal of Shandong province in 2020,an annual average increase of 45,569 billion RMB in government purchases is needed.Based on three departments Solow model,dynamic simulation of the government purchase on consumption is drawn. Using the estimated size of government purchase,the parameters of the three departments Solow basic differential equation is estimated. Basing the equation,the effect of government purchase on consumption is dynamically simulated under the background of without considering the new urbanization and considering the new urbanization. The results show that the relationship of government purchase and consumption is alternative. On the other hand,government purchase may improve the consumption rate by increasing government consumption.