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Dynamics between government spending and economic growth in China: an analysis of productivity growth

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  • Su Dinh Thanh
  • Nguyen Phuc Canh

Abstract

This study investigates the dynamics between government spending and economic growth in China through influencing the productivity growth of human capital byapplying Markov switching estimates for the annual time series data of China over the period 1952–2014. Firstly, we found that the Chinese economy exists in two states including state one with low growth and state two with high growth. Secondly, the consumption spending has significantly positive effect both states, while the military spending has only positive effect in state two. Interestingly, the growth effect level of consumption spending in state two is smaller than that in state one, implying a reducing effect of total factor productivity in state two. Thirdly, the combined effects of consumption spending and military spending with human capital are state dependent. This combined effect is reduced in both states, suggesting that government spending does not improve the productivity growth effect of human capital.

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  • Su Dinh Thanh & Nguyen Phuc Canh, 2019. "Dynamics between government spending and economic growth in China: an analysis of productivity growth," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 17(2), pages 189-212, April.
    • Handle: RePEc:taf:jocebs:v:17:y:2019:i:2:p:189-212
    DOI: 10.1080/14765284.2019.1567069
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    Cited by:

    1. Hao Chen & Duncan O. Hongo & Max William Ssali & Maurice Simiyu Nyaranga & Consolata Wairimu Nderitu, 2020. "The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL," SAGE Open, , vol. 10(1), pages 21582440198, February.
    2. Van, Huong Vu & Van Dao, Le & Hoang, Lich Khac & Van Hien, Ngo, 2023. "The efficiency of government finanical expenditures before and during the COVID-19 pandemic: A cross-country investigation," Finance Research Letters, Elsevier, vol. 54(C).
    3. Gilbert Nartea & Jacqueline Hernandez, 2020. "Government Size, the Composition of Public Spending and Economic Growth in Netherland," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 9(2), pages 82-89.
    4. Nguyen, Canh Phuc & Su, Thanh Dinh, 2022. "The influences of government spending on energy poverty: Evidence from developing countries," Energy, Elsevier, vol. 238(PA).
    5. Canh Phuc NGUYEN & Christophe SCHINCKUS, 2020. "The Spending Behavior of Government through the Lenses of Global Uncertainty and Economic Integration," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 35-57, July.
    6. Xin, Baogui & Zhang, Tengda & Santibanez-Gonzalez, Ernesto D.R., 2024. "Synergistic effects of regional environmental governance on alleviating energy poverty and promoting household decarbonization," Energy Policy, Elsevier, vol. 185(C).
    7. Thanh Dinh Su & Canh Phuc Nguyen, 2022. "Productive Contribution of Public Spending and Human Capital in Developing Countries Revisited: The Role of Trade Openness," Foreign Trade Review, , vol. 57(1), pages 66-84, February.

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