On The Transition Economies Of Decentralized Governance And Economic Development In Harmony

In this paper we first argument that government play the core role in economic growth and development by developing the key proposition of new institutional economics "Institution is important" along political dimensionality. The points of views are economic growth and economic harmoniousness depend on the property protection, contract enforcing, the level and structure of public goods provided by governments which are the rational choice of governments. Basing on this theory, we draw the outline of Chinese public finance change and reducing a conclusion that this change made the local governments an independent key body between two dimensions of concerns and become the key role of governance of local economy.So, we continue to develop the proposition "governments is important " along the two dimensions and analyze the inspiring and constraints facing by local government and its economic outcome derived from central government and jurisdiction citizen . The first dimension is fiscal constraints and political stimulating. The second dimension is the constraint from the factor liquidity on the fiscal policy. We find that economic growth and economic unbalance could coexist. This proposition tells us that if we want to solve the problem of economic unbalance we should widen and deepen the fluidity of factors and build the grass democracy and made the public finance transparent.Through research above, we can get some important propositions: Chinese style fiscal decentralization provide an constraint and stimulating only between central and local government, but there is no formal regulating between local governments and local governments and citizen. Basing on this conclusion ,we put forward a deepening path: widen and deepen the liquidity and building grass democracy.