Study On The Effects Of Economic Openness And Local Fiscal Revenue And Expenditure

Since the reform and openness, China’s economy and society have been making a long-term rapid progress. In addition to brought capital, technology, management and competition in a variety of ways to promote economy growth and society progress, openness of economy has changed the local government’s incentive and constraint, resource endowments, and its economic and social environment, induced the change of local fiscal system, local fiscal policies and behavior choices, which affected local fiscal performance, and thus had a profound impact on economic growth and social development. A comprehensive research on the influence of openness on China’s local fiscal is helpful to accurately grasp the local fiscal policy choice and the evolution of fiscal system, and the further reform and improve of fiscal system, at the same time, which will contribute to the integrated scientific analysis on the impact of openness, and a better openness.Focusing on the theme of the influence of economic openness on local fiscal performance, the dissertation is a three-part examination the relationship between openness and local finance from the local fiscal revenue and expenditure effect of economic openness, local fiscal efficiency effect of openness, local fiscal balance effect of openness. This thesis is structured as seven chapters. The first chapter is an introduction. As a starting point for the full text, it introduces the research background, objects, methods and frameworks, and a brief review of relevant research. The second chapter constructs a local financial revenue response function, and empirically researches the impacts of economic openness on the changes of local fiscal revenue and its relative structure. The third chapter constructs a translog production function of tax to evaluate the tax collection efficiency using the SFA method, and test the influence of economic openness on the tax collection efficiency. The forth chapter builds a spatial dynamic panel model of local fiscal expenditure, empirically analyzes the local fiscal expenditure effect of economic openness to test the "efficiency" and "compensation" hypotheses of openness by using GMM estimation methods. Based on three paths of fiscal expenditure efficiency including fiscal resource allocation efficiency, public sector production efficiency and external environment efficiency, and according to the Musgrave three-function framework, the fifth chapter respectively study the influence of economic openness on public goods supply efficiency of local fiscal expenditure, the fiscal expenditure efficiency of promoting income distribution equitable, and the fiscal expenditure efficiency of accelerating the economy growth. The sixth chapter empirically researches the influence of economic openness on local fiscal self-imbalance and horizontal imbalance by respectively using inter-provincial panel data model and time-series data co integration and VEC models. The seventh chapter is the conclusions and research prospects of this dissertation.This dissertation’s basic conclusions are as follows:(1) Because of foreign investment and trade having different affects on economy and tax bases, current system of tax location, its own characteristics of the local fiscal revenue, the strategy behaviors of local government based on multi-objective, the economic openness produces the complex and non-uniformity affects on the scale and structure of local fiscal revenue. (2) The local governments manipulating the tax collection intensity to attract FDI and the tax evasion behavior of foreign-owned enterprises induce the increase of foreign-invested enterprises to decline the tax collection efficiency. The increasing of trade openness enhances the overall efficiency of economy and society. The spill-over effects of efficiency to tax sectors, the improving of civil efficiency conception and sense of society participation forms the pressure on the tax department, which makes trade openness contributed to the improvement of the tax collection efficiency. (3) The investment openness increases the agriculture-aid expenditure and social welfare expenditure, and decrease the expenditure for administrative expenses and fiscal subsidies. The trade openness increases the expenditure for operating expenses of culture departments and expenditure for public security agency, prosecutorial agency, court and justice agency, and expenditure for capital construction, science and education, at same time, decreases the social welfare expenditure. Openness rectifies and intensifies fiscal expenditure structure distorted simultaneously. (4) Raise the degree of investment openness will reduce the public goods supply efficiency of fiscal expenditure, at the same time, improve the income distribution efficiency of local fiscal expenditure. In the whole country, the trade openness improves the local fiscal expenditure performance to promote economic growth, but investment openness has the opposite effect. Because of the differences of the degree of foreign trade and investment, and the difference of economic development level and structure, economic openness has the significant regional differences on the local fiscal expenditure performance to promote economic growth. (5) Economic openness conduces to the local finance their own balance, but the affects of openness on the finance own balance are different in different regions. Because the tax revenue created by foreign-invested enterprises and foreign trade is mainly owned by the central government, which makes economic openness not significantly affect the horizontal imbalance of local fiscal revenue. In the long run, economic openness can help reduce the local fiscal expenditure horizontal imbalance; in the short term, trade openness can reduce the local fiscal expenditure horizontal imbalance, however, investment openness can intensify the horizontal imbalance.About the policy implications, the study argues that in the open world, China should build up the system conditions that maximize the positive effects of economic openness and minimize the negative effects of openness, under the premise of insisting on the openness policy. In the process of attracting foreign investment and promoting foreign trade, the openness should abide by the our laws, regulations and international practices, and be in favor of the progress of economy and society, the local governments must eliminate all kinds of explicit and implicit super-national treatment for foreign capital. The openness level of every region should be coordinated with its economic development level; the openness level among different regions should be balanced gradually. To build up system and environment basis for enhancing the positive effects and reducing the negative effects China should reform the performance evaluation mechanism of local officers, make the budget decision more democratic, scientific and transparent, and balance the development level of economy and society.