Effects of government expenditure on private investment: Canadian empirical evidence

The purpose of this study is to investigate the relationship between government expenditures and private investment in Canada during the period 1961 to 2000. To this end, effects of five categories of government expenditures on investment are examined within the cointegration and error-correction framework. The empirical results show that government expenditure on education and health has positive effects whereas government expenditures on capital and infrastructure have negative effects on private investment. The other expenditure categories, including government expenditure on protection of persons and property, expenditure on debt charges, and expenditure on government and social services have no significant effects on private investment.I wish to thank Baldev Raj for his valuable comments on this study which have led to an important improvement in the paper. I would also like to thank my colleagues Tomson Ogwang, Paul Bowles, Jalil Safaei, and an anonymous referee for their comments. However, the usual disclaimer applies.First version Received: May 2002/Final version received:20 May 2004     

政府支出与居民消费:替代或互补——基于非线性有效消费函数的实证

以非线性有效消费函数为基础,笔者构造了一个政府支出与居民消费的跨期替代模型,并利用1978年～2004年相关数据,实证研究了我国政府支出与居民消费的关系.研究结果表明,在短期内,我国政府支出与居民消费呈互补关系;但在长期内,我国政府支出与居民消费呈替代关系,即政府支出挤占居民消费支出.因此,在短期内,政府可以通过增加支出增加居民消费以提高社会总需求;但在长期经济均衡时,政府不宜采用支出政策来实现长期经济目标.     

政府支出与居民消费——一个基于跨期替代模型的中国经验分析

政府支出的增加之所以能够引致居民消费的增长，是由于政府支出具有乘数效应。本文通过建立一个居民消费的跨期替代模型，分析了中国的政府支出与居民消费之间的关系，认为在短期内，中国政府可能通过增加政府支出的方式增加总需求，但在长期均衡时政府支出完全挤占了消费支出。     

我国政府支出和公共投资对私人投资的效应分析

首先采用Diamond模型对公共投资及各项政府支出对私人投资影响进行理论分析;然后利用1980~2005年间的数据,运用协整检验、单方程误差修正模型分析了我国政府支出和公共投资及各项政府支出对私人投资的长短期效应;经验结果表明无论从长期还是短期看政府支出挤出了私人投资而公共投资则挤入了私人投资,国防支出和行政管理支出在长期和短期都挤出了私人投资,社会文教支出长期挤入了私人投资,短期挤出了私人投资。     

PRIVATE AND PUBLIC EDUCATION: HUMAN CAPITAL ACCUMULATION UNDER PARENTAL TEACHING*

This paper examines a simple overlapping generations model of human capital accumulation under both the public and private education regimes. Both young individuals and their parents allocate time to human capital accumulation. Under the public education regime, the government collects tax to finance expenditure for education resources. We show that there exists a level of tax which maximizes the speed of human capital accumulation because of parental teaching; and, if the government chooses tax rates adequately, human capital grows faster and welfare levels become higher under the public education regime than under the private.     

财政支出、经济外部性与政府双重角色转换——基于DSGE模型的理论分析和实证研究

将政府财政支出分解为消费性支出和生产性支出,建立了政府消费性支出与私人消费之间、政府资本与私人资本之间的非线性替代关系函数。将政府公共生产性服务和公共消费性服务的双重角色加入动态随机一般均衡(DSGE)模型,分析不同经济结构下政府的双重角色对中国宏观经济的影响差异。实证结果显示:政府生产性支出的弹性系数正在变小,政府生产性支出对中国宏观经济的影响在逐渐消失;在合理监管下,政府消费性支出有利于改善和提高人们的生活质量,并且不会对私人投资产生挤出效应。因此,政府应加大对财政消费性支出的监管力度。     

Government expenditure composition and fiscal policy spillovers in small open economies within a monetary union

We examine the implications of government expenditure that is complementary to private consumption, and government investment that can improve the productivity of private capital, in a global DSGE model. We show that government investment can improve an economy’s external competitiveness and stimulate private investment. If governments can finance this investment by reducing consumption that is not complementary to private consumption, then this is ex-ante budget-neutral, provides a small, but persistent stimulus without a deterioration in competitiveness, and leads to lower debt in the medium run. We also examine the cross-border transmission channels of government expenditure shocks in a monetary union when government consumption is complementary to private and public investment is productive. While both assumptions enhance cross-border spillovers, a direct import content is required to generate spillovers similar to those found in the empirical literature.     

Macroeconomic effects of fiscal policy in Pakistan: a disaggregate analysis

This study analyzes the macroeconomic effects of fiscal policy on macroeconomic variables in Pakistan. The study utilizes VAR framework and uses quarterly data of Pakistan from 1976Q1 to 2017Q4. The results showed that after an increase in government expenditures, private consumption and prices take three quarters to increase, while private investment follows the declining trend. Private consumption and interest rate are negatively related with taxes, while private investment and prices are positively related with taxes. Real GDP, private consumption and interest rate respond positively with an increase in developmental expenditure, public consumption and public investment. Private investment is negatively related with development expenditure, public consumption and public investment. An increase in direct tax as well as indirect tax leads to an increase in real GDP, private investment and interest rate, while private consumption takes three to five quarters to responds. Private investment and prices are positively related with non-tax revenue, while real GDP, private consumption and interest rate are negatively related. These results support the Keynesian view that government expenditure and taxes are useful tools to stimulate the economic activity, while crowding-out hypothesis holds in Pakistan as well. An active and efficient role of government is required for macroeconomic stability.     

Endogenous mortality, human capital and economic growth

We consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.     

Financing Higher Education: A General Equilibrium Public Choice Approach*

A public choice approach is used to examine the level of a tax-financed grant chosen by a cohort, allowing for a wide range of interdependencies, including the goverment's budget constraint The existence of an externality is necessary, but not sufficient, for support of a grant It is shown that a majority voting equilibrium exists. Comparative static analyses are carried out using a minimum of assumptions about the structure of the model An increase in government expenditure for non-higher education purposes is associated with an increase in the preferred grant while an increase in private returns to education reduces the grant     

我国的政府教育支出与经济增长——基于1980—2011年的数据分析

对于政府教育支出与经济增长的关系实证研究并没有确定的结论。本文利用我国1980-2011年的时间序列数据分析了政府教育支出对经济增长的影响。实证研究表明,无论是在长期还是短期内政府教育支出都对经济增长具有正的显著的影响,即我国的政府教育支出能够促进经济增长。 Granger因果检验表明,我国的政府教育支出与经济增长之间存在双向因果关系。另外,长期中政府教育支出对经济增长的影响效果大于短期。这说明政府教育支出对经济增长的影响是个长期的累积过程,因而教育投入不应该是一种短期行为。目前我国政府的教育支出仍处于相对较低的水平,具有较大的提升空间,从而具有推动经济增长的巨大潜力。因此,为保持经济的持续增长,在近期和长期内不断加大政府对教育的投入、优化教育资源的配置应是一项极其重要的教育政策。     

Provincial government expenditures in Canada: an empirical analysis

Most empirical studies have sought to explain the overall growth of the total government expenditures. Few studies have focused on the growth of spending at the provincial level. This article seeks to fill the gap. It examines the growth of government expenditures in Canadian provinces. Data spanning the past three decades are used to explain the growth of provincial government expenditures in Canada and to test alternative hypotheses. From a basic general theoretical model, three empirical models are developed and tested. It is concluded that the growth of the private sector share of the Provincial Gross Domestic Product (PGDP), capacity utilization and factors such as federal transfer payments to the provincial governments best explain the growth in expenditure at the provincial level. The expenditure policies of provincial governments are found to be independent of the political stance of the political parties in power. Estimated short-run and long-run ‘income’ elasticities of provincial government expenditures with respect to PGDP reveal that government expenditures have grown in proportion to PGDP. The growth of provincial spending over the last three decades has been stimulated by the demand for services (such as education and health) and by federal transfer payment programmes through their combined income and substitution effects.     

Ricardian equivalence,expansionary fiscal contraction and the stock market: a VECM approach

The effect of government taxation on future consumption has been explained in three ways: the Keynesian approach, the Ricardian Equivalence proposition and the German view of Expansionary Fiscal Contraction (EFC). This paper reports empirical evidence on the validity of these explanations by examining the impact of a shock in government taxation upon private consumption, once the effect of the stock market is removed. A vector error-correction model is estimated for the USA, Japan, Germany, France, the UK, Italy and Canada for 1950–1997 and the impulse response functions of a shock in taxation and in expenditure are examined. The responses to an increase in government taxation appear to lend support to the EFC, while the responses to an increase in government expenditure upon consumption suggest that the reaction of private consumption is more in line with the traditional Keynesian approach.     

GOVERNMENT CONSUMPTION AND THE COMPOSITION OF PRIVATE EXPENDITURE: A CONDITIONAL ERROR CORRECTION MODEL

In this paper we provide empirical evidence of the relationship between government purchases and private expenditure by adopting a microeconomic approach. Using UK quarterly data, a long‐run demand system conditioned to the public sector is obtained by specifying a vector error correction model in which government consumption is assumed as an exogenous I(1) forcing variable. Our findings reject the hypothesis of separability of individual preferences between public and private expenditures, with simultaneous crowding‐out/in effects. Moreover, crowding‐out effects of government consumption on private spending are found to be larger for those goods and services that produce similar utility.     

THE HOUSEHOLD DISTRIBUTION OF GOVERNMENT SERVICES FOR AGRICULTURE AND EDUCATION IN PENINSULAR MALAYSIA IN 1974

The paper reports on several results from a comprehensive study of the household incidence of public expenditure in Peninsular Malaysia in 1974. The results for education show a pro-poor distribution of expenditure when measured as a share of household income. Using however the criterion of each according to his needs (that is the number of school-age children per household) reverses this outcome. In agriculture, because of the importance of land settlement, benefits from public expenditure distribute predominantly in favor of the poor.
The research differs from the usual study of this kind in that individual government outputs such as school years, or fertilizer loans, were defined, and in the case of education their unit costs estimated and their distribution across households measured. In the case of education, both the costs of services from capital and the households' out-of-pocket educational costs were added to the current subsidies. As one consequence, it was seen that total expenditure for education in Malaysia exceeds one-eighth of GNP, nearly double the conventional estimate. Equally important, for the poor the burden of private costs for education even within a public system were seen to be very high.
The contrasts between the strong results for education, a broad based social service, and the less conclusive results for agriculture, an economic service which impacts directly on production, were instructive in suggesting the limitations of such research in measuring the effects of government budget activity on distribution.     

Crowding-out and crowding-in effects of the components of government expenditure

This article examines the effects of disaggregated government expenditure on investment using fixed- and random-effect methods. Using the government budget constraint, the analysis explores the effects of tax- and debt-financed expenditure for the full sample, and for subsamples of developed and developing countries. In general, tax-financed government expenditure crowds out more investment than debt-financed expenditure. Expenditure on social security and welfare reduces investment in all samples while expenditure on transport and communication induces private investment in developing countries.     

Continuity and Change: Labour Market Programs and Education Expenditure

Since 1971 Australian governments have varied expenditure on labour market programs and education. This article attempts to explain these changes in the context of several straightforward hypotheses concerned with political processes. In both policy areas the evidence is generally consistent with four views: that ALP governments spend relatively more than coalition governments; that ALP expenditure is more likely to be directed to the public sector, and coalition expenditure to the private sector; that governments of both political persuasions tend to move towards their opponents' position in budgets immediately preceding elections; and that, after the marked changes initiated in the 1972 to 1974 period, the parties have become increasingly similar in expenditure terms. Apparently there have been important differences between the political parties in government, but these distinctions have become less clear–cut over recent years.     

关于公共支出与经济增长的国内外研究综述

公共支出与经济增长的关系一直以来为经济学家们所争论。持公共支出促进经济增长观点认为,政府公共支出在经济增长中发挥着重要作用,因为它为经济发展提供了大量的公共品和其他具有外部效应的公共福利或服务,从而鼓励和便利了私人投资,形成了一个较好的投资环境,促进了经济增长。而持反对意见的认为,公共支出往往是生产率较低的,为融通政府支出而形成的高税收又会对私人部门的消费和投资造成很大的负面影响,因此,必须缩减政府支出,才能保证经济增长。当然也有人持两者根本就没有关系的观点。     

Does defence expenditure affect private consumption? Evidence from the United States

This paper empirically discusses the relationship between government defence expenditure and private consumption for the United States. The estimations show a substitution or complementary effect of the military sector on private categories of consumer choices, although sensitivity analysis for different utility functions and sub-samples indicates a time-decrease on substitutability. Our findings are in line with previous results highlighting a weak substitution of defence expenditure on aggregate consumption.