Institutional Foundation And Innovation Of Local Government Competition In China

Competition in the sense of modern is an important part of the systematical social life. As a sound mechanism for resources collocating, the base and core of market economy is competition. Numerous research productions on market competition can be found. However, competition among local governments, which is a comparatively special institution under market economy system, still has little awareness and less production. Until the 1950's, the international economics field began to touch the competition among the local governments when investigating the provision of public goods. Since then, neo-institutional economics granted the local government with new implications and began to study the subject from the institutional perspective and its changes. In China, due to the long-term influence of the high centralization of state power in politics and economy, the canonical competition among the local governments emerged late relatively, then the relevant study production have been less. In general, the research in this fields is still on the preliminary stage. The majority of the research productions are introduced from overseas with limited features, most of them lay particular stress on certain aspects rather then from comprehensive point of view. Observing from the practical domestic situation of China, the local government competition is an evident reality, on which high attention to should be placed. Therefore, it is of significant theoretical value and practical meaning that we should enhance the study on the problem of the local government competition, establishing and perfecting the theory of the local government competition to meet the demands hi the period of China's institutional change. Just like the price is the tool for market competition studying, institutional innovation is the basic tool for local government competition study. In this paper, the author is to work over and probe into the local government competition, hoping to provide theoretical guidance to standardization and leading local government competition.1In China, the development of the decentralization with the financial reform as its origination and main content, has established the basic situation of the competition among local governments, which has been the practical problem of the economy and society and has attracted more and more attention. The local government competition is defined as the cross-regional competition carried out by the local governments in different regions within one country for the purpose of providing public goods to theircitizens, attracting capital, talents and technique within administrative boundaries. As a relatively special organization, the local government competition is of many independent characteristics differing from those of the general industrial organization competition, such as competition means, competition forms, stimulation structures, and competition principles, etc. The direct purpose of the local government competition is to attract the influx of more factors of production, and through the allocation of factors of production, to let the local government obtain more financial benefits to enhance the quantity and quality of public goods in the current precinct. The development of decentralization in China further shows the local government's benefits. Under the situation of decentralization, the pressure from some institutional arrangement on public goods' hierarchical provision, local government's achievement evaluation and so on, has intensified the trend of the local government competition. Interest structure decides the behavior modes. Being a relatively independent interest organizations, in order to attract inflow of the factors of production into the current precinct, concerning about their own benefits (mainly financial benefits), the local governments inevitably compete each other which has shown distinct positive effect aerie: starting up the drive of economy increase, speeding up the steps of institutional innovation, promoting the optimization of public goods structure, and e...