Poverty Alleviation Programs, Fiscal Decentralization and Economic Growth: a General Equilibrium Model

Yue Lai, Tian-zhu Cheng

COMPUTER MODELLING & NEW TECHNOLOGIES 2014 18(12C) 776-780

School of Finance and Economics, Guangxi University of Science and Technology, Liuzhou 545006, Guangxi Prov., P. R. China

How to measure and evaluate the effect of poverty alleviation program is an important issue. We should understand that the program expenditures and economic growth are reciprocally affected. The state-level government transfers payments aiming at poverty alleviation to local-level governments, which contribute to the output directly. On the opposite, inefficiency allocation of local public resources caused by distorting local decision-making will bring negative effects on economic growth. A general equilibrium model was established based on the framework of endogenous growth theories, to analyze these complicated effects. The conclusions showed that, as the proportion of poverty alleviation expenditure in the state-level governments increasing, the economic growth rate firstly increased, and then fell down ultimately. Numerical simulation also revealed a negative relationship between poverty alleviation proportion and fiscal decentralization rate. It is suggested that the efficiency improvement of local public resources allocation at practice would be urgent.