The Spatial Spillover Effects of Fiscal Expenditures and Household Characteristics on Household Consumption Spending: Evidence from Taiwan

Abstract

The main purpose of this study is to explore the determinants of average household consumption spending in counties and cities from the two aspects of government fiscal expenditure and household characteristics. A spatial econometric model, the spatial Durbin model, was used to analyze Taiwan’s county-level and municipal panel data from 2000 to 2020. Global spatial autocorrelation and local spatial autocorrelation were applied to examine the overall degree of spatial agglomeration of average household consumption spending in Taiwan and the agglomeration status of specific counties and cities. The empirical results show that the average consumption spending per household of all counties and cities in Taiwan presents spatial autocorrelation, and the agglomeration of specific counties and cities is affected by different ruling parties of the central government. In terms of direct effects, the average consumption spending per household in local counties and cities is influenced by household characteristics, including average disposable income per household, average number of employees per household, and average living area per capita. In terms of the spatial spillover effect, the average consumption spending per household in local counties and cities is influenced by household characteristics of the neighboring counties and cities, including the average disposable income per household and the average living area per capita. Surprisingly, local economic development expenditure and local expenditure on education, science, and culture have no significant impact on the average consumption spending per household in counties and cities. The results of this study can be taken as a reference for government policymaking.