Lu Shengfeng and Liu Pan
(Economics and Management School, Wuhan University)
Abstract: In the modern economy and society of increasingly technological and knowledge development, technological innovation plays a decisive role in regional economic development. Meanwhile, long-term investment in technological innovation owns high-risk and benefits, determines the Government’s fiscal policy should be an incentive. China’s fiscal expenditure policy is effectively motivating the regional technological innovation? Based on Chinese provincial data on this issue empirically tested. The study found that: (1) China’s fiscal expenditure policy does not adequately function effectively stimulate technological innovation; (2) Further analysis showed that the impact of fiscal spending on technological innovation presents an inverted U-shaped relationship, and therefore theoretically optimal size of government expenditure optimal incentives for innovation. The policy implications of the article is that the government incentive to invest in the expansion, but also need to focus on efficiency standards, over extensive investment or investment policy may lead to inadequate efficiency losses, market players need to activate their innovative power.
Key Words: Fiscal Expenditure; Regional Innovation; Inverted U-shaped Relationship; Panel Data Model