Premium
HOW LARGE WILL BE THE EFFECT OF CHINA'S FISCAL STIMULUS PACKAGE ON OUTPUT AND EMPLOYMENT?
Author(s) -
He Dong,
Zhang Zhiwei,
Zhang Wenlang
Publication year - 2009
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2009.00480.x
Subject(s) - economics , stimulus (psychology) , fiscal multiplier , multiplier (economics) , china , fiscal policy , short run , macroeconomics , monetary economics , government spending , welfare , market economy , psychology , political science , law , psychotherapist
This paper estimates the effect of China's fiscal stimulus package on output and employment. The input–output analysis shows that the package has a multiplier of approximately 0.84 in the short run, generating 18–20 million new jobs in non‐farming sectors in the first year. A dynamic structural model shows that the multiplier is around 1.1 in the medium run as fiscal spending leads to higher household consumption and corporate investment over time. The size of the fiscal multiplier also depends on the cyclical conditions of the economy, the policy environment and the distribution of funds across sectors.