China: Does Government Health and Education Spending Boost Consumption?

14 Pages Posted: 1 Feb 2010

See all articles by Ray Brooks

Ray Brooks

International Monetary Fund (IMF) - Asia and Pacific Department

Steven A. Barnett

International Monetary Fund (IMF) - Fiscal Affairs Department

Date Written: Janurary 2010

Abstract

Consumption in China is unusually low and has continued to decline as a share of GDP over the past decade. A key policy question is how to reverse this trend, and rebalance growth away from reliance on exports and investment and toward consumption. This paper investigates whether the sizable increase in government social spending in recent years lowered precautionary saving and increased consumption. The main findings are that spending on health, but not education, had an impact on household behavior. The impact, moreover, is large. A one yuan increase in government health spending is associated with a two yuan increase in urban household consumption.

Keywords: China, People's Republic of, Economic growth, Education, Government expenditures, Health care, Income distribution, Private consumption, Private savings, Private sector

Suggested Citation

Brooks, Ray and Barnett, Steven Alan, China: Does Government Health and Education Spending Boost Consumption? (Janurary 2010). IMF Working Paper No. 10/16, Available at SSRN: https://ssrn.com/abstract=1544710

Ray Brooks (Contact Author)

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Steven Alan Barnett

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

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