Fiscal Expenditure Incentives, Spatial Correlation and Quality of Economic Growth: Evidence from a Chinese Province

Abstract

This paper constructs an index system to evaluate economic growth quality. After taking into account the spatial correlation, the impact of public expenditure on economic growth quality is investigates by using panel data from a Chinese province during 2007 and 2014. In this analysis, different levels of economic growth quality and fiscal expenditure are considered. The results reveal that (1) Economic growth quality should be measured not only from scale but also from structure, performance and coordination. (2) There is agglomeration effect because local government fiscal expenditure greatly promotes local region economic growth, and this rule not only embodies in scale, but also in performance and coordination. (3) The spatial spillover effect of neighbouring government fiscal expenditure on local economic growth quality cannot be ignored, and different fiscal expenditure represents different results. There is complex spatial correlation among governments and corporation relationship among regions is very important. Finally, some policies about fiscal exnpenditure and economic development are proposed.