Does China Lose Efficiency during Scale Expansion of Government

This paper constructs the theoretical mechanism of government scale on the production efficiency,then it makes the empirical analysis on dynamic effects of fiscal scale on production efficiency and its optimal size based on Chinese provincial data from 1997 to 2010.The result shows that:under the conditions of market equilibrium and optimization,the scale expansion of government will be able to promote the improvement of production efficiency;since the expansion of government spending over the optimal one,it hinders the production efficiency improvements,it also doesn't play a positive role in China;it's optimal and effective that the share of government spending in GDP maintains broadly stable scale between years for promoting efficiency improvements.The policy implication is that the growth of government size should be kept in a progressive procedure,and a blind growth will bring a loss to the production efficiency.Since the tax system reform in China,the relative scale of fiscal expenditure sharply increased,its sustainability and the economic and social impact should draw attention from the the whoel society.