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Public Expenditureson Social Programs and Household Consumption in China


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  • Emanuele Baldacci
  • Ding Ding
  • David Coady
  • Giovanni Callegari
  • Pietro Tommasino
  • Jaejoon Woo
  • Manmohan S. Kumar


This paper shows that increasing government social expenditures can make a substantive contribution to increasing household consumption in China. The paper first undertakes an empirical study of the relationship between the savings rate and social expenditures for a panel of OECD countries and provides illustrative estimates of their implications for China. It then applies a generational accounting framework to Chinese household income survey data. This analysis suggests that a sustained 1 percent of GDP increase in public expenditures, distributed equally across education, health, and pensions, would result in a permanent increase the household consumption ratio of 1¼ percentage points of GDP.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/69.

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Length: 28
Date of creation: 01 Mar 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/69

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Keywords: Economic models; Fiscal reforms; Government expenditures; Health care; Income distribution; Private consumption; Private savings; Social safety nets; expenditures; household consumption; expenditure; social expenditures; consumption impact; health expenditures; current consumption; disposable income; lifetime income; consumption ratio; household income; social expenditure; income effect; education expenditures; consumption expenditure; public expenditures; average propensity to consume; health expenditure; total consumption; public spending; private consumption expenditure; current income; consumption impacts; government spending; expenditure data; expenditures on health; household budget; consumption categories; expenditure reform; consumption levels; consumption rate; public expenditure; consumption data; consumption rates; household budget survey; national income; income growth; expenditure increase; expenditure programs; consumption quintile; consumption level; expenditure categories; income channel; labor income; income data; consumption smoothing; desired consumption; national saving; level of consumption; household current consumption; household budget surveys; consumption decisions; consumption function; government expenditure; household expenditures;

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