Stuidies On The Competition Of Equal Local Governments In China

The study on the government competition began in the 1950s in USA. In 1956, the first government competition model was built under the assumption of complete fluidity by Amercian researcher Tiebout. And then the foreign researchers focused their study interests on the financial problems such as the production of public goods and tax policy. Some of them considered the gonvernment competition as "the race to the bottom", which will cause the loss of welfare and damage of the district environment.but others hold the different opinion that the competition is "the race to the top", which can improve the development of regional economy and make the governments more efficienct. Since 1995, the competition between local governments in China has received more concerns. But most researchers followed the traditional financial framework to classify the government competition in China as the transferred expenditure competition between central government and local governments, tax competition and the competition of public goods provision. They also agreed that the competition lie both in horizontal level and in vertical level. But they all neglected the great difference in political system between China and western countries. The definite authority of Chinese superior governments and the absolute dependence of the subordinate local governments both come from the political structure of the centralism in China, which are not like those in America or in Europe. Under the political structure of centralism, the government competition in vertical level cannot exist in China, and even the competition in horizontal level in China is heterogeneous, which also dues to the factors such as the lower fluidity of population and resource, the lower level of economic development and so on. Those local governments that lie in the same level of political system and are governed by the same superior government are called equal local governments and they also are adjacent to each other. The competition among them is most appearent and representitive in China. After illustrating the special system preequisite of the government competition in China, we consider that the most influencing competition behaviors lie in the local regions. In each region the government owns several equal local governments. Although some researchers have paid attention to the local and partial characters of competition between local governments, research on the competition of equal local government is not mature. An overall theory system needs to be built to explain this kind of government competition. It is, of course, the aim of this article.The first step to study the equal local government competition is to clarify the different roles that the equal local governments play both in the political structure and in regional economic structure. These two different roles will determine the particular nature of equal local governments. In building our model of equal local government competition, three assumptions will be presetted. First, the governments will pursuit the maximum behalf without constraits of minimum cost. Second, equal local governments are under the constraits of resource scarcity. Third, the governments have bounded rationality. Local governments in a district, act firstly as the subsidiaries of their upper supervisor, are destined to competing for accomplishing the goals given by their supervisor, in order to gain more political behalves. We name this kind of competition as "political performance competition". But with the development of Marco economy, local governments are now acting as the behalf representatives of the residents and firms in their own regions. They also compete for improving the benefits of their people or their enterprises. We name this kind of competition as "public performance competition". The competition among local governments that are under the control of a superior government, named as "political performance competition", is reasonable, because it is necessary for local government to achieve its own funcitions as a political subsidiary institute. But when the local government, facing the pressure caused by the achievement of its predecessor or its equivalent rivals, is given some goals by its supervisor, it will probably choose the consealed choice set and play competitive games with other local governments, which will do harm to the regional economy. Acting as the agent of its people and firms, the equal local government has the interior impulse to compete with other districts to get more benefits for satisfing the demand of benefit or welfare improvement from their own districts, which also includes the government's own demand of benefit. Each competition between equal local governments bases on the endowments those governments have. The endowments include three sorts. Some endowments in the local district are favorable in the competition, which of course will be given more attention and more privileges to develop beyond other endowments. When a local government in a district does the first initiation, the others will have to choose what they should do. Whether they do new initiation or they just mock the previous one depends on the comparsion between the cost of initiation and the cost of mocking. The result of definite games is that the initiation becomes the consistent solution of the "public performance competition" problem among local governments, yet in the "political performance competition"equal local governments lack of the desire of initiation. As a result of equal local governments, the industry structure in the local district will be changed by this competition-oriented preference. Pursing the faster speed is the nature of the political performance competition, and it will finally cause the same tendency of fluctuation of the representative varies, for example, industrial structure, while the public performance competition leads to the different tendency of the development of the representative endowments. We choose national series, data of Jiangsu province and weifang city in Shandong province as our samples to test our hypothesis and find the result of empirical anaylsis can match the hypothesis rised by the competition model we built. Corresponding conclusions are given then.