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Public Expenditures on Social Programs and Household Consumption in China

Author

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

Abstract

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.

Suggested Citation

  • Mr. David Coady & Giovanni Callegari & Ding Ding & Jaejoon Woo & Pietro Tommasino & Mr. Emanuele Baldacci & Mr. Manmohan S. Kumar, 2010. "Public Expenditures on Social Programs and Household Consumption in China," IMF Working Papers 2010/069, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2010/069
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