Research On The Private Investment Effect Of Productive Government Spending

Investment,as one of the three important engines of economic growth,is a major factor and the main driving force for economic development.It plays an important role in increasing total social demand,increasing and improving supply,and adjusting the balance between supply and demand.And private investment based on market economy has the characteristics of clear property rights,high efficiency,flexible mechanism,strong adaptability,rapid decision-making,rapid mobilization of funds,timely selection of talents,efficient incentive mechanism,and strong technological innovation capability.And it is the key to economic growth's internal dynamics and vitality,economic development,adjustment of economic structure,expansion of social employment,and sustainable development.However,the resource allocation function of the market is not omnipotent.There are still problems in the market such as market monopolies,insufficient information and asymmetry,externalities and public goods,unfair income distribution,and economic fluctuations.Therefore,this requires that we must not only play a decisive role in the market,but also better play the role of the government.The role of government's responsibilities in the allocation of resources is mainly to provide public goods,meet public needs,make up for market failures,and conduct effective macroeconomic controls.The government's use of public construction as a means of production expenditure has become an important way for the government to remedy market failure.By making up for the insufficiency of private investment,the government's investment in infrastructure and basic industries can lay the foundation for the development of the national economy,and it can also create a favorable investment environment for private investment.The complementarity between public capital and private capital can reduce the cost of private investment,stimulate private investment growth,and productive government spending is an important means for government departments to play a role in macro-control.However,traditional Keynesianism believes that the large increase in government spending will lead to higher interest rates and a crowding-out effect on private investment.Whether the crowding-out effect exists or is directly related to the scale and role of the government in regulating and controlling the macro-economy by means of increasing or reducing the production expenditure by the government has an important reference value for the government to introduce a control policy.To explore the potential impacts of productive government spending on private sector investment,this paper identified the response of private sector investment to productive government spending shock at provincial level of China based on three-variable SVAR model and found that there were bias results on crowd-in and/or crowd-out effects in national and regional prospective literatures.Then this paper identified empirically via panel data model the factors and its theoretical mechanisms which affected the private sector investment effects of the productive government spending in the crowd-in and crowd-out provincial group respectively.This paper found:Not only the correlation between the growth rate of private sector investment and institutional factors,energy and resource constraints and economic factors was significantly different,but also through the institutional,energy and resource constraints and economic factors,the productive government spending took obviously structurally different effects on the private sector investment.Especially in such provincial governments as crowd-in effect,productive government spending reduced the crowd-in effect via fiscal spending decentralization,the proportion of central government investment,the proportion of non tax revenue in general public budgets and the economic development level measured by per capita income;Productive government spending increased the crowd-in effect weakly via green development and the per capita energy resources.In such provincial governments as crowd-out effect,productive government spending eased the crowd-out effect via the proportion of central government investment,fiscal transparency,green development and the economic development level measured by per capita savings;Productive government expenditure enhanced the crowd-out effect weakly via fiscal spending decentralization and ownership structure measured by the proportion of the state-owned economy.This means that different institutional adjustments and optimizations should adopt to such provinces as crowding-in and crowding-out effect groups of the private sector investment.