What Are Automatic Stabilizers?

Automatic stabilizer is also called "internal stabilizer". In a capitalist economy, it is not necessary to constantly change the economic policies of the government to help mitigate fluctuations in economic factors such as employment levels, price levels, and income levels, and to make them automatically stabilized. There are many kinds of automatic stabilizers. The most important stabilizers in the public sector are personal income tax and corporate income tax. In addition, there are unemployment benefits, various social welfare expenditures, agricultural product price maintenance systems, etc .; the most important stabilizers in the personal sector. The device is the marginal saving tendency. In economic analysis, more attention is paid to the role of the public sector stabilizer. Generally, when total demand is less than the total supply level, personal income decreases, corporate profits decrease, unemployment increases, and agricultural product prices fall. In this case, the amount of personal and corporate income tax collected will automatically decrease, unemployment benefits will automatically increase, and the government will purchase agricultural products to maintain agricultural product prices. ^[1]

Automatic stabilizer

In social and economic life, the factors that usually have the role of automatic stabilizers include:

About the government can shrink through the role of automatic fiscal stabilizers

A prominent change in the economic function of the Chinese government in the reform of the market-oriented economy is the abdication of mandatory plan management and the introduction of guiding policy management. In the face of economic fluctuations, the government tries to let the market play its part unless some extremely special and irreversible situations occur. Guiding role. Therefore, the automatic stabilizer must play its due role in economic and social life, in order to calm economic fluctuations and ensure the stability of economic growth.

1.Financial automatic stabilizer in economic monetization

The automatic stabilizer mechanism, as a policy tool for maintaining the stability of economic and social development by fiscal policy, has different roles and degrees of effectiveness under the planned economy system and the market system. There are many indicators to measure the degree of marketization in a country. This article selects the degree of economic monetization, that is, the ratio of M2 to GDP, as a measurement indicator. Before 1984, the central bank held more than 90% of the country's total financial assets. Until the comprehensive financial reform of the banking system began in 1994, the People's Bank of China was specifically positioned as a central bank with a stable currency as its main goal. Therefore, the measurement of the degree of economic monetization will take 1994 as a significant time line.

According to the data test, the domestic M2 / GDP ratio has basically climbed all the way since 1994. The highest point reached 188.45% in 2003. Although it fell to 163.86% in 2005, it is still 63% higher than in 1994. An increase in the degree of economic monetization indicates an increase in the degree of marketization. When it is difficult for monetary policy to effectively control economic fluctuations alone, fiscal policy has begun to cooperate more with monetary policy to play a role in stabilizing the economy and society. In the process, the country's fiscal policy has undergone a change from active to stable, but each time the country adopts a camera-selected fiscal policy, there have been negative factors after several years of implementation. It is difficult to reasonably estimate a moderate grasp. As a result, attention has been turned to financial stabilizers.

2. The effectiveness of domestic financial automatic stabilizers

The automatic stabilization mechanism mainly affects the choice of production and consumption behavior of entrepreneurs and consumers through the secondary distribution of income. However, due to the relative potential of the automatic financial stabilizer, its effectiveness may make people's income Expenditure, etc., has less impact on society. To this end, we first test how the distribution of government departments and enterprises, individuals, and the distribution of income in urban and rural areas are proceeding during the current economic development process in China.

Revenue flows from individuals to businesses and governments. From 1994 to 2005, the share of households, enterprises, and government in national disposable income has changed greatly. Among the 12 percentage points of the sharp decline in household income, enterprises and government Increased by 10 and 2 percentage points respectively. In the same period, the change in the share of the primary distribution income did not exceed one percentage point.

The income distribution gap between urban and rural residents has widened. While the household sector, that is, the share of personal income, has declined, the proportion of rural disposable income in total income has continued to decline. The per capita net income of rural households increased by 4.7% and 5.3% respectively during the Ninth Five-Year Plan period and the same period, while the per capita disposable income of urban households increased by 5.7% and 9.6%, respectively, as shown in the figure below:

(3) The regional disparity level is higher than the urban-rural disparity level. From a regional perspective, in 1999, 19 of the 31 provinces and cities nationwide were below the national average, and by 2005, one more region had been added. Nineteen cities and towns were below the national average in 2000 and 23 in 2005, an increase of about 21%. It can be seen that the regional gap is larger than the urban-rural gap, that is, the larger gap is caused by the regional gap. For example, in these cities and towns below the national average, the urban-rural gap is much smaller than the urban-rural gap in developed regions.

The proportion of fiscal expenditure has been declining. Weak financial supervision and excessive government involvement are more prone to large economic fluctuations. At this time, the automatic stabilizer is more prominent. The proportion of national fiscal expenditure to GDP has been declining from the beginning of the reform. Although it has rebounded since 1997, it has basically remained below 20%.

The above analysis shows that from the perspective of domestic actual conditions, in the context of rapid economic growth, the government budget is used as a representative of fiscal policy decisions, and the social security system and tax are used as automatic stabilizers. The regional income gap has not alleviated the situation of excessive income distribution gap or the continuous accumulation of funds in industries with excess capacity. And from the perspective of taxation, apart from the typical progressive nature of personal taxation, corporate taxation has not performed well in this regard.