Research On The Provision Of Rural Public Services Under The Fiscal Decentralization System

This thesis does a research on the problem of the Chinese rural public services on the background of fiscal decentralization system, mainly setting the background of the Chinese currant fiscal decentralization system that is after the system of tax distribution. It describes the difficult situations of rural public services providing then analyzes the reasons. Because Chinese fiscal decentralization system is still in the perfect developing process, the thesis could provide improving suggestion to afford guarantee for the development of the rural public services. The traditional fiscal decentralization system thought the local public services providedby the local government fitted the residents' different preferences more accurately, and it could improve the efficiency of supply of the rural public services. But we have not got the agreed results with the theoretical analysis in the practices. Especially in the research of Chinese economics, it is commonly thought that the tax sharing system reform in 1994 and the establishment of the promotion stimulation system lead to the yardstick competition launched by the local government, finally the local public services especially the rural public services are in short supply and inefficient.The research found that fiscal decentralization of Chinese style is the institutional restraint caused by the undersupply of rural public services and the unbalance of supply and demand. The grassroots governments' behaviours are influenced by the inner system design, check-up system and related supporting measures in Chinese currant fiscal decentralization system. The theses put forwards the general theoretical analysis framework and discusses the influences provided by the rural public service in political incentive, fiscal incentives and financial system design by the way of establishing theoretical model, then further applies the Chinese provincial panel data to analyse the evidences of the fiscal decentralization influencing on the rural public service in order to propose some related policy suggestion.The main conclusions of the thesis are as follows:1.According to the finding of supply and demand conditions about Shandong province rural public services, it could be found some difficult situations in supply and demand of current rural public services . For example the dislocating coexistence of supply and demand in rural public services provided by governments; the insufficient of the main rural public services provided by governments e.g. The current rural compulsory education, medical treatment and public health, social security, technology services, the insufficient of provide and supply resulting from the significant gap between city and countryside; the investigative township governments invest the limited financial resources to economic construction, so they pay less money on these aspects, which are what the peasants need urgently. These activities make the supply and demand disjoint.2.The traditional fiscal decentralization theory considers fiscal decentralization as the important influencing factor determining the supply level of the public service and efficiency. In the recent fiscal decentralization system, system of tax distribution enhances the enthusiasm of enlarging the tax income in grassroots governments, giving birth the fiscal incentives done by grassroots government officials. The grassroots government usually choose a equilibrium solution in the decentralization mode to invest all the financial resources to the most efficient fields in order to stimulate the economy to develop rapidly. This thesis adopts the simplified form of Holmstrom-Milgrom' model to analyse the rural public service behaviours provided by the grassroots governments under the current fiscal decentralization system. In promoting championships system, the benefits caused by the economic developmemnt to the grassroots governments are far better than that provided by the rural public services, at the same time the sense grassroots government officials choose to invest the limited financial resources to the economic development, even divert the investments of the rural public service, which leads the insufficient of the rural public services.3.The solid evidences show that separation of powers is the important influencing factor of the rural public service supply level, having different effects on different public services. In the scopes of the whole country, the separation of powers has the significant negative effects on the medical treatment and public health, rural compulsory education, while it has the positive effects on the new typed rural cooperative medical services. Besides that, because of the unbalance between different areas in our country and the different economic development levels, in the fiscal decentralization system, behaviors of the grassroots governments are different between the rich areas and poor areas, which leads to the different area influences under the fiscal decentralization.4.The loss situation appearing in Chinese rural public services is the inevitable economic situation in Chinese economic development, which is the inevitable consequence of financial incentive resulting from the reform development strategy---"fairness comes after efficiency" and the officials promoting system---"the examination mainly in GDP". The fiscal decentralization systemsystem dominated by tax distribution is a kind of fiscal revenue incentive naturally. It aims to stimulate the efforts of the grassroots governments to promote local economic growth by the way of tax system design. At the same time, the promotion and the reappointmentof the officials are aimed by the economic performance, so the endogenous incentive mechanism in fiscal decentralization distorts the structure of grassroots fiscal expenditure. But the actual set of Chinese fiscal decentralization system is not the ideal state.It is not all effective in the way of regulating the grassroots governments "economic man" behaviour or designing the incentive mechanism that the grassroots governments supply basic public services. For example the income dilemma of the grassroots governments: the inadequate financial budget, non-budgetary income expansion; depending greatly on the transferred payment; weakness of the land granted growths,etc.; spending predicament of the grassroots governments: the simplified supply pressure, the competition between the governments resulted from the crossing powers; the mismatching of the power and property arrangement; The unfinished tax system reforms under province; softening constraint budget,etc. Besides, the external Chinese fiscal decentralization environment and fully democratic environment are not available, which restrain the advantages of the public services provided by the fiscal decentralization system to the rural resident.5.Policy suggestion on perfecting fiscal decentralization system and improving the rural public services.â‘ The reform of public financal system. First, we should divide powers rationally. If we want to solve the rural public service supply difficulties, we should make the providing divisions of governments in rural public services clear.and the assignment of expenditure responsibilities can be constrained by"the law of government expenditure responsibilitier", Secondly, we should ensure that governments own the property relative to their powers. According to that, we can adjust the distribution pattern of property ownership among different governments to moderate the roles of financial incentives to guide the rural public services' supply behaviours of the grassroots governments. Through the way of redetermining the goal of tax incentives to adopt tax system design to bring the financial rewards into the rural public service, which can arouse "economic man" behaviours from economic angle. Thirdly, we should perfect the transfer payment system among governments. Fourthly, we should deepen the reform of the management system under provincial finance. Fifthly, we should increase the transparency of budget arrangement and strengthen the government budget constraints.â‘¡Reform of officials promotion system. In the current phase of economic development in Chin, the problems of rural public services' supply and the equal solved problems should be put to an important agenda. Economic growth earnings should be shared. The theory of " the supply of public services" should take the place of "GDP grows only" theory, governments should consider to assess the proportion of basic public services supply in the promotion mechanism and make the balance with economic growth assessment step by step in order to curb the amplified financial incentive.â‘¢Related supporting system with systematic reform. We should analyse the following subjects: establishing the expressing mechanism of the farmers' rural public services, reforming the household registration system, establishing equal identity of resident in urban and rural areas, consolidating unified urban and rural public service supply mechanism and the effective accountability mechanism.