Empirical Research On The Influence Factors Of Local Government Expenditure Behavior

Tax-sharing system, which has been implemented from1994, had not onlychanged the situation which the central government revenue was much lower than thelocal, but also made an impact on the local government behavior. On one hand, thelocal government’s status got strengthened. The competition between governments haspromoted the speed of local economy; On the other hand, the political centralizationmade officials pay more attention to the development of local economy instead of theequalization of public services. In the excitation of economy and politics, localgovernment had to extend the investment portion. On the contrary, the point that fiscaldecentralization can significantly improve the supply level of public service andsatisfy the public preferences of local residents has been proved by fiscal federalismtheories and related empirical analysis. There are great differences between the theoryand the practice. So what causes these differences? This article mainly focuses on theinfluence factors of local government spending scale and expenditure structure fromthe angle of empirical, in order to provide some quantification evidences for thefurther adjustment of China’s fiscal system reform.The article consists of six chapters. The first chapter is introduction; the secondchapter is some basic theories which used in the article, including fiscaldecentralization, endogenous growth, competition, governmental regulation andregional disparity; in the perspective of demands, the third chapter tests therelationship between per capita GDP, external economic, income disparity,fractionalization, expenditure interaction and local government behavior; the fourthchapter calculates the mpk, and making use of mpk and capital stock, we test therelationship between capital and local government behavior; using the frontiertechnical development and the technical efficiency into which we have decomposedthe total factor productivity, and making use of the inter-provincial data of1998to2009, the fifth chapter researches the impact of total factor productivity on the localgovernment behavior; the last chapter is the conclusion and research perspective.The empirical results show:(1) the development of local government size meetsWagner’s law, and at the same time satisfies the efficiency hypothesis andcompensation hypothesis; the income disparity between urban and rural areas has asignificant positive effect, fractionalization has significant negative effect, and expenditure interaction has a significant positive effect on the local governmentbehavior;(2) there exists strategic interaction of capital mobile in China; the capitalmobile and the capital interaction do exactly opposite effect on local governmentbehavior: the capital mobile would extend the invest portion and the capitalinteraction would make equalization of public services;(3) frontier technicaldevelopment which shows spillover effect in eastern region has a positive effect onregional disparity; on the other side, technical efficiency has negative on regionaldisparity. Frontier technical development would make equalization of public servicesand technical efficiency would extend the invest portion.