%0 Journal Article
	%A Paitoon Kraipornsak
	%D 2010
	%J International Journal of Economics and Management Engineering
	%B World Academy of Science, Engineering and Technology
	%I Open Science Index 42, 2010
	%T Impact of Government Spending on Private Consumption and on the Economy: Case of Thailand
	%U https://publications.waset.org/pdf/8479
	%V 42
	%X The recent global financial problem urges government
to play role in stimulating the economy due to the fact that private
sector has little ability to purchase during the recession. A concerned
question is whether the increased government spending crowds out
private consumption and whether it helps stimulate the economy. If
the government spending policy is effective; the private consumption
is expected to increase and can compensate the recent extra
government expense. In this study, the government spending is
categorized into government consumption spending and government
capital spending. The study firstly examines consumer consumption
along the line with the demand function in microeconomic theory.
Three categories of private consumption are used in the study. Those
are food consumption, non food consumption, and services
consumption. The dynamic Almost Ideal Demand System of the three
categories of the private consumption is estimated using the Vector
Error Correction Mechanism model. The estimated model indicates
the substituting effects (negative impacts) of the government
consumption spending on budget shares of private non food
consumption and of the government capital spending on budget share
of private food consumption, respectively. Nevertheless the result
does not necessarily indicate whether the negative effects of changes
in the budget shares of the non food and the food consumption means
fallen total private consumption. Microeconomic consumer demand
analysis clearly indicates changes in component structure of
aggregate expenditure in the economy as a result of the government
spending policy. The macroeconomic concept of aggregate demand
comprising consumption, investment, government spending (the
government consumption spending and the government capital
spending), export, and import are used to estimate for their
relationship using the Vector Error Correction Mechanism model.
The macroeconomic study found no effect of the government capital
spending on either the private consumption or the growth of GDP
while the government consumption spending has negative effect on
the growth of GDP. Therefore no crowding out effect of the
government spending is found on the private consumption but it is
ineffective and even inefficient expenditure as found reducing growth
of the GDP in the context of Thailand.
	%P 1002 - 1009