Public Spending and Quality Economic Growth: Policy Experiment In A Multi-Sector CGE Framework-质量院英文网
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Public Spending and Quality Economic Growth: Policy Experiment In A Multi-Sector CGE Framework

April 7, 2016

Zhang Xiaodi

(Institute of Economics, Shanghai Academy of Social Sciences;School of Economics, Fudan University)


Abstract: One of the important criteria for the quality of economic growth is whether it enhances people’s well-being, and the orientation of public spending policies may influence households’ income, employment, welfare and equality. Productive public investment promotes growth significantly in the short run, but contributes little to improvement in people’s income and equality. Public consumption and transfer have positive impacts on long-run factor accumulation, workers’ income and utility. However, shifting resources from productive investment to public services like education and health care will aggravate employment and wealth gap, as the the growth of physical capital cannot match the increasing human capital. Instead, raising retirement age will not only fund public services and transfers adequately, but also lower households’ tax burdens and unemployment rate.


Key Words: Quality of Economic Growth; Orientation of Public Spending; Multi-Sector CGE; Policy Experiment