## Public Expenditures on Social Programs and Household Consumption in China

_IMF Working Papers, March 1, 2010_

## Source details

**Canonical URL:** [Public Expenditures on Social Programs and Household Consumption in China](https://www.imf.org/en/publications/wp/issues/2016/12/31/public-expenditures-on-social-programs-and-household-consumption-in-china-23716)

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## Bibliographic details
- Authors: Emanuele Baldacci, Ding Ding, David Coady, Giovanni Callegari, Pietro Tommasino, Jaejoon Woo, Manmohan S. Kumar
- Published: March 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451982138.001

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### Main findings
- Increasing government social expenditures can make a substantive contribution to increasing household consumption in China.
- 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.
- The paper combines:
  - An empirical study of the relationship between the savings rate and social expenditures for a panel of OECD countries, used to provide illustrative estimates of implications for China.
  - A generational accounting framework applied to Chinese household income survey data.

### Methodology and analysis
- Empirical panel analysis:
  - Examines the relationship between the savings rate and social expenditures for a panel of OECD countries.
  - Uses those empirical relationships to generate illustrative estimates for China.
- Generational accounting:
  - Applies a generational accounting framework to Chinese household income survey data to assess the impact of public expenditure changes on household consumption.

### Policy implications and interpretation
- Reallocating or increasing public expenditures toward social programs (education, health, pensions) can raise household consumption ratios.
- A policy increase of social spending equivalent to 1 percent of GDP, evenly split across education, health, and pensions, is estimated to have a lasting positive effect on household consumption as measured by the household consumption ratio.

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## Content in this bundle

- **1. Household Saving Panel Regression, 1990–2008**
  - [1. Household Saving Panel Regression, 1990–2008 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp1069.pdf.md){rel="alternate" type="text/markdown"}
  - [1. Household Saving Panel Regression, 1990–2008 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp1069.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/public-expenditures-on-social-programs-and-household-consumption-in-china-23716_