A Study On Chinese Local Government Fiscal Competition And Its Optimization

The local government fiscal competition is accompanied by a product of fiscal decentralization, local government competition. Fiscal decentralization, local government has a certain degree of financial autonomy. Local government, starting from the local interests or officials of their own interests, is bound to use various financial instruments around the capital and human resources and mobility of economic factors or known as the mobility of tax base to be fierce competition, local government fiscal competition.Since the reform and opening up, China’s economy has maintained a high growth of more than30years, the great achievements of world attention, is known as the "China miracle" for China’s economic growth miracle reasons to explore, is the theory of the economics profession hot. In recent years, with the Chinese model of economic growth caused by the accumulation of various social contradictions and the intensification of slowly crescendos of the Chinese model of economic growth itself and its sustainability questioned, such as low efficiency of growth, low employment growth uneven growth. System evolution from the traditional planned economy to a market economy, the local government act as the actual role of the "Action Group".The rapid rise of local government fiscal competition after reform and opening up is the most significant local governments behavioral characteristics in this process. Although the result of competition of the local government finance, what is of positive significance, or some of the negative sense, academia there is a lot of controversy. But there are both positive and negative effects for the local government fiscal competition, but it is the consensus of the academic, is also an indisputable fact. In other words, the high growth of Chinese economy and the many social contradictions are inextricably linked with the competition of local government finances.The current Chinese local government financial competition obviously has the general characteristics of "non-standard competition", showing the lack of legal norms, adjusted for inter-governmental fiscal relations and the behavior of fiscal competition between local government is often detrimental to the overall welfare of society. Thus, the arrangements to establish a reasonable system design and system specification of the order of competition, has become a fundamental goal of the competition in the local government financial optimization. To make the right design and selection of the optimal path of the local government fiscal competition, we must first correct understanding of the local government fiscal impact of competition factors and substance. Based on the above point of view, using the logic of analysis, that is, start with the multi-dimensional perspective on the competition of local government finance a variety of macro-, meso-and micro-influencing factors to system analysis; then by presenting the relevant Chinese local government finances two basic propositions of the competition, namely, the centralization and decentralization in dispute "and the incentives of local governments and their officials, the source of contention, and further reveals the essence of the local government fiscal competition; then institutional change and institutional costs point of view, to build an optimization theory framework on competition in the local government finance, and in this framework, two alternative optimal path of the Chinese local government fiscal competition, institutional changes in the nature of fiscal federalism and institutional improved multi-objective nature of the responsibility dimension of the principal agent system, and a comparative analysis between the pros and cons from the perspective of system cost.The basic conclusions of this paper is as follows:local governments and their officials as rational actors, is conferred by the behavior of space according to the institutional environment and institutional incentives or constraints to select positive or negative, competitive strategy and competitive behavior. Distortion of the competitive behavior of local government finance, it is due to defects in China’s current institutional arrangements and improper, such as lack of administrative decentralization, non-institutionalized and non-stability, and performance appraisal system is one-sided pursuit of economic performance, as well as a competitive binding mechanism due. The occurrence and development of local government financial competition is actually a decentralized system to interact with the competition rules of the institutional change process. Reform and opening up, the central raised to the decentralization reform of local fiscal competition in the local government, with the changes in the institutional environment and local government fiscal competition system performance, form and content of decentralization is also constantly adjusted. This adjustment will inevitably affect the local government fiscal competition rules changes, thus changing the incentive structure and constraints of local governments and their officials as the main competition, and thus impact on their choice of competitive strategy and competitive behavior. The long term, non-institutionalized decentralization to institutionalize decentralization, never standardized competition to the standard of competition is the inevitable historical evolution of competition in the local government financial optimization logic. Optimization path for local government fiscal competition,"fiscal federalism" is indeed the specification of Intergovernmental fiscal relations provides a better blueprint", and even its benchmark significance" in fact the world Government joint recognition. However, its implementation needs major institutional change as a guarantee of the implementation process, inevitably there is a big social risk. For consideration reasonably avoid this risk, we can also choose a perhaps not so "perfect", but it is more safe and secure within the system to seek the optimal path of the partial breakthrough ", the proposed multi-objective responsibility to the degree of principal-agent system that is based on such considerations of theoretical exploration.