A Dynamic Analysis on the Effect of Government Spending Structure on Private Consumption:Necessary Adjustment of Government Spendingin Life-cycle Perspective

There is room for doubts about the rationality of government spending from the angles of aggregate amount and structure.The paper establishes a recursive model of representative agent to study the effect of government spending structure on private consumption.The empirical results show that government spending on administrative expenses has crowding-out effects on private consumption;government spending on social culture and education,economic construction,and other subsidies has pulling effects on private consumption.Furthermore,although government spending on economic infrastructure has a positive effect on GDP,consumption and employment rate in the short run,it has a negative effect on the three variables in the long run.The results shed some light on the proper adjustment of government spending in order to increase private consumption.