Public Expenditures on Social Programs and Household Consumption in China

Author/Editor: Baldacci, Emanuele ; Callegari, Giovanni ; Coady, David ; Ding, Ding ; Kumar, Manmohan S. ; Tommasino, Pietro ; Woo, Jaejoon
Publication Date: March 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: 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 1ΒΌ percentage points of GDP.
Series: Working Paper No. 10/69
Subject(s): China, People's Republic of | Cross country analysis | Economic models | Education | Fiscal reforms | Government expenditures | Health care | Income distribution | Pensions | Private consumption | Private savings | Social safety nets

Author's Keyword(s): China | household savings | social expenditure | generational accounting
Publication Date: March 01, 2010
Format: Paper
Stock No: WPIEA2010069 Pages: 28
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