Relationship between Components of Fiscal Expenditure and the Economic Growth—An Empirical Analysis of the Panel Data of Chinese Provinces

Financial policy is a major means of macroeconomic regulation and control, which plays an important role in ensuring normal operation of market economy and fulfilling state functions.This paper builds a panel data model of Chinese provinces with data of 1985-2007, and analyzes the relationship between components of financial expenditure and the economic growth.The findings show that the national economic growth are positively correlated with components of fiscal expenditure nationwide, including public expenditure, expenditure for innovation of enterprises, expenditure for agriculture and for administration; and that the relationship between regional economic growth and its components of fiscal expenditure varies by region.