China: Does Government Health and Education Spending Boost Consumption?

Author/Editor: Barnett, Steven ; Brooks, Ray
Publication Date: January 01, 2010
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 10/16
Subject(s): Economic growth | Government expenditures | Health care | Income distribution | Private consumption | Private savings

Author's Keyword(s): China | saving | consumption | health | education
Publication Date: January 01, 2010
ISBN/ISSN: 9781451962130 Format: Paper
Stock No: WPIEA2010016 Pages: 45
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