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The Influence Of Local Government Investment On Economic Growth And Employment During The Economy Transition Period Of China

Posted on:2006-01-12Degree:DoctorType:Dissertation
Country:ChinaCandidate:W G ZhangFull Text:PDF
GTID:1119360212484770Subject:Political economy
Abstract/Summary:PDF Full Text Request
The local government investment in this paper refers to the performance of all the local governments in the whole investing process and its value orientation to invest performance. The whole investing process includes the investment forecast, the decision, implementation, supervision and regulation and so on, each can be connected with the investment partially in the process. The performance of the local government in the whole investing process may be divided into several types, such as the achievement and non-achievement, positive achievement and negative achievement.Local government investment has the division of narrow sense and generalized sense. The narrow local government investment refers to the investing expense of local government for the infrastructure construction using the revenue inside its financial budget, the special income outside the budget and debt. The generalized local government investment refers to all the investment under the lead of local government. This not only includes the local government investment financing for the infrastructure from all kinds of channels, but also includes the benefit policy and convenience condition for the enterprises making use of the authority and the resources owned by local government, such as all kinds of preferential policy about the use of land and the tax supplied by local government to attract external investment, the guarantee and support provided by local government to help the enterprises to gain enough loan from banks, the strive for the preferential policy for the enterprises to higher authority government and central authorities like gaining the quota of list and the chance of the trials of enterprise reform. In this paper, local government investment refers to the generalized sense.In the existing literature, there is few about direct and special studies about the effects on economical growth of our local government investment. There is even fewer about direct and special studies about the effects on economical growth and employment of our local government investment.There are two viewpoints about the studies about the effects on economic growth of our local government investment in China. The first viewpoint emphasizes that local government investment has the positive influence to economic growth. Thesekinds of literatures mainly analyze the promoting influence to economic growth of local government from the perspective of fiscal decentralization. In fact, fiscal decentralization is connected with local government investment, but is different from local government investment. Fiscal decentralization mainly emphasizes is independently controlled scale to financial resources of local government and incentive to local government of fiscal decentralization. But in this paper local government investment is defined not only considering positive roles to economic development of fiscal decentralization, but also considering many other factors caused by fiscal decentralization in the process of the reform, such as the transferring of all kinds of rights about state-owned enterprises from central government to local government, the releases about the jurisdiction of economic management and policy-making for the local government, and implements of the rate of GDP growth as a gauge of the official achievements in a long period of time. Moreover, fiscal decentralization is a system variable in some degree and is difficult to be tested especially in China, because in China many statistical data are deficient frequently. The situation causes that the multitudinous scholars only can use some approximate proxy variables. The second viewpoint insists that the local government investment hinders the effective disposition of the resources in some degree and has negative influence to economic growth. These kinds of literatures are usually from the visual perspective of local protection and excessive competition among different local governments.Contrarily, there is much research about employment and the relations between economic growth and employment. But no one consider the problem from the perspective of local government investment. Some think that under the leadership of governments, fund cost is pulled down artificially, thus causing fund excessively dense and affecting the employment But the above analysis is mainly from the perspective of central government, because all the rates of loan are formulated by central bank in China. Considering the factor of inflation, the rates of loan are not truly high. This situation has caused the production price of fund to be twisted in some degree, so capital has become a substitute for labor. Under the condition, environments of employment development are destroyed. We will analyze the problem from the perspective of local government.In this paper, the author will attempt to probe into the relations between economic growth and employment from this perspective of local government investment. This isan innovative topic. The author used the panel data from 30 provinces in China from 1987 to 2001 to examine the effects on economic growth and employment of local government investment. We first examined the short-term effects using the variable difference data. Then we also examined the long-term effects. Because most macroeconomic variables such as GDP and local government investment are all nonstationary variables itself, we first use Levin, Lin and Chu statistic to make cointegration test. Considering financial decentralization after 1994 and active fiscal policy after 1998, we joins two dummy variables to analyze the effects on the economical growth and the employment of local government investment and the change of elasticity.This paper not only aimed at empirical research, but also probed into the mechanism from the perspective of local government investment. In the analysis, we fully considered the difference between China and the countries in Europe and America. We analyze that local government investment has led to the industrialization and the urbanization development, and promote the innovation of local government system. Such an explanation is more systematic, comprehensive and has the persuasive power.This paper also discussed the relations between economic growth and employment from the perspective of local government investment. Namely, rapid economic growth and the drop of employment elasticity appeared at the same time. The author proposes that the investment led by local government is not effective and the multiple effect is not enough. The author points out that local government mainly give favorable conditions and policy supports to the big enterprises and manage land actively. And such behaviors can be the cause of the decrease of employment elasticity. This is also one contribution of this paper.Based on the above analysis, this paper proposes certain policy meanings. The author thinks that further reform about the property rights should be deepened and fiscal decentralization system should be established and consummated to take the social management and the public service as the orientation. This is the optimized policy choice for local government investment in the transition period of China, thus solving the problems that the efficiency of economic growth is low in a long-term and the employment elasticity tends to drop.To solve the above problem, we think that further deepening the reform about the property rights is very necessary. We must strengthen the restraint of the propertyrights to local government investment, deepen the land reform in the transition period of China, and establish the agricultural land flow system adapting the socialism market economic system with the characters of fixed price, saving use benefit share. We must further deepen the reform of state-owned enterprises causing it to become a system with clear ownership, unambiguous rights and responsibility, strict protection, and smooth flow. We must further deepen the reform of state-owned commercial banks and strive in reforming sole ownership, carrying on the property right reorganization according to the request of modern bank, listing, managing private commercial banks, and introducing foreign capital banks.To establish and consummate financial decentralization system with Chinese characteristic, our overall idea is as followed. We must overcome the overdensified administrative structure, avoid excessive competition, and alleviate asymmetry of rights and responsibilities between central government and local government. At the same time, we should consider such problems as high federation, the relaxation of the management to outside budget and one-dimension performance assessment on local government achievements. Our aim is to establish and consummate a fiscal decentralization system with the social management and the public service as the orientation, thus fully playing the roles of the enterprises as main investment agents. Such a system will be full of the vital energy and the high efficiency.
Keywords/Search Tags:Local Government Investment, Economic Growth and Employment, Fiscal Decentralization
PDF Full Text Request
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