Multipliers of public expenditure. State and economy

In the article below we will try to consider the multiplicative theory of public expenditure, which, in the time of the popularity of Keynesian doctrines, caused a lot of resonance and controversy. The topic will be interesting to everyone who is not indifferent to the modern economy, since in the conditions of shaky politics of various powers is more urgent than ever.

The role of multiplier theory in the modern economy

Often a number of macroeconomic tools are used to enable the country to substantiate its policy in the economic aspect. Multipliers of government spending are one of the components of this broad list, therefore they have an impressive theoretical background. For several centuries, many scientists have tried to disclose the meaning of this concept and use it within the limits of practical application.

In its broadest sense, the multiplier shows an increase in economic indicators. And public spending in Russia is no exception. Deeper to this concept came the representatives of the Keynesian macroeconomic doctrine, and they reached the conclusion that this tool shows a direct relationship between the dynamics of national wealth and the level of welfare of the population of the country, regardless of the direction of the fiscal policy of the latter.

Autonomous costs and multiplier

The state and economy are closely interrelated, therefore it is not a secret for anyone that any changes in one institution always entail a certain dynamics of the individual values of the other. This process can be called induction, because only a small push of any of the financial instruments generates a number of processes in the whole country.

Thus, for example, the autonomous expenditures of the state in the multiplicative theory are explained by the relationship with changes in the dynamics of the labor market. In other words, it costs the government to incur certain costs in the context of certain places of their origin, as it is immediately possible to observe the characteristic growth in the incomes of citizens. And, accordingly, an increase in the employment of the population. To obtain a quantitatively valid picture, it is sufficient to correlate the dynamics of these indicators with each other.

Investment costs

The structure of public spending is quite extensive, so it is worth paying due attention to the country's investment activity, which is the basis of a healthy competitive economy.

The multiplier of investment costs shows the ratio of the dynamics of the level of investment in this or that innovation business to the level of variable operating costs. It is considered correct to take into account only the financial flows excluded from gross national income .

In other words, according to this method, we will be able to track the level of expenses incurred by the state to improve the technological and scientific processes in the country, as well as their share in the overall economic flows. In general, there is nothing complicated in this dynamics - in the absence of investments the level of consumption will be equal to zero, but with the growth of investments it will increase.

Employment market expenses

The multiplier of public expenditure in the labor market aspect is a separate neo-Keynesian doctrine, which is difficult to compare with any other direction. Since, if previously we positioned the aggregate costs of the state as a secondary phenomenon, we now look at what the investment policy, apart from the usual results, can lead to.

Trivial, but few can trace the following relationship. The costs of the employment market are significantly reduced at a time when investment costs are rising. It follows that the well-being of the population is increasing, and, accordingly, the demand for second-rate goods (machinery, clothing, furniture) is expanding, generating a positive dynamics in the changes in the incomes of their producers. In other words, investments in one sphere of the economy entail an increase in profits in another.

Fiscal expenses of the country

The multiplier of state taxes and expenses in the fiscal aspect indicates the dynamics of changes in the level of output in the manufacturing sector, depending on the growth rate of the tax burden. As a rule, this coefficient is negative, because a small number of business representatives want to give part of their net profit in favor of budgetary units.

It's another matter if it is, for example, a differential tax on PE or income of individuals. In this case, the burden is imposed step by step - depending on the financial level of the object: the higher the welfare - the lower the rate. But, as modern practice shows, in a market economy this theory is just a utopia, and has nothing to do with modern realities.

Balanced budget in national expenditures

Multipliers of public expenditures in their pure form show the dynamics of the change in the value of the gross national product, depending on which part of the state treasury was spent for the purpose of purchasing various kinds of products. Also, this indicator is inversely proportional to the marginal consumer propensity of the population. This can be explained by such an increase in budget revenues, when, with a reduction in its expenditures, part of its profits is limited to the previous series of articles.

Thus, it is possible to derive the formula for a balanced budget: a nationwide expenditure may grow by a certain amount (let's call it A), which is caused by an overall reduction in the tax burden for entrepreneurs, and this in turn is fraught with an increase in the net profit of entrepreneurs by A units.

Foreign trade costs of the country

The multiplier of government spending (the formula of measurement varies depending on the key component, the dynamics of which we are trying to determine) also plays an important role in the formation of an open economic policy. The latter is realized only through the use of export-import operations in practice. Therefore, we can say with confidence that foreign trade is not the last, but rather a key role in the formation of costly articles of state economic policy.

In the multiplicative theory it is worth noting that the costs incurred by the country for the purpose of implementing export-import transactions aimed at indirect intervention in the balance of another country directly affect the value of the gross national product, which is purely an internal tool.

Thus, the magnitude of the multiplier in the aspect of foreign trade is defined as the ratio between quantitative changes in GNP and the cost of open operations carried out outside the country.

conclusions

On the basis of all of the above, one very interesting conclusion suggests itself. We have tried to prove that the multipliers of public expenditures completely reflect the relationship in the changes in key financial instruments of state economic policy. And, probably, we succeeded quite successfully.

We were able to see that the budget balance is so shaky and susceptible to various elements of both domestic and foreign trade activities of the country, which can be said with complete certainty: no process passes without a trace, and even more so autonomously. Multipliers of government spending can always help us deduce the magnitude of the increase in income, national product and many other indicators that indicate the economic health of the state.