Fiscal Decentralization And Local Economic Development

The fiscal decentralization response to the economic relations between the central and local government, even all the other levels, is an objective guarantee promotes the government reasonable operation.The FGTs concerns the link of decentralization, economic growth and economic efficiency. The SGTs further study of the incentive compatibility problems of multi-level government, government and enterprises, expand and enriched on the theory of fiscal decentralization. However, the papers has not been the same conclusion on the relations between fiscal decentralization and local economic development.On the one hand, controversy exists in fiscal decentralization can promote economic growth; On the other hand, it's not reach a consensus on fiscal decentralization can play a role on narrow the distribution gap.Differences in culture, economy, history, territory, and so on, while most countries perform their duties through the muti-level governments practice, and generally adopted fiscal decentralization.Comparison to the United States, Germany, Japan, which represented the developed countries of the intergovernmental fiscal relations, the affairs and the structures of fiscal expenditure, the local revenue sources and intergovernmental transfer system and so on, not only the same point, but also the obvious differences have been shown.The level of economic development, relations between the government and the market determine the specific forms of financial decentralization, and the performance of fiscal decentralization is the feedback. The fiscal decentralization can not follow the law, also has no ideal model, and the level of decentralization is the result of historical evolution. The developed countries concern economic growth, also take into account to the equipoise on narrow the economic gap and improve the social welfare. No matter how the national economic structure, fiscal decentralization guaranteed a higher level in controlled circumstances on the financial resources of the sub-balance and coordination.China's fiscal decentralization different from the developed countries.Whether under the conditions of planned economy, or the initial stage of reform and opening, even the recent years, the fiscal decentralization gradually achieved the objectives of the reform. At different stages, fiscal decentralization is the concrete expression of the national development strategies and the behalf of muti-level governments. This is the endogenous logic of fiscal decentralization reform.China's goal of fiscal decentralization reform is not only to raise the economic efficiency of local government, but also to strengthen the central financial ability to regulate and control.China's government has created favorable conditions for the realization of the objectives of decentralization, but there are also obstacles and deficiencies. The fiscal decentralization reform needs to follow the evolution of the economic system path. First, the decentralization can not be absolute; Second, should compliance with the principle of cost-benefit; Third, not only to promote the improvement of economic efficiency, but also ensure a relatively fair social distribution.The fiscal decentralization reform during China's economic transformation is an optimize process of both resources and management structure. As economic activity meets the characteristics of "economic man", it is in line with the benefit of local government and the officials to maintain and enhance the competitiveness of the area and promote local economic growth. Gradual economic transformation is still some shortcomings, for example, asymmetric information, lack of economic incentives, commission-agent relations missing, lack of restraint and so on.The preference of GDP incentives of local governments and Top-down appointment system will inevitably lead to some negative effects, such as disorderly competition, local barriers, widening of the income gap, hardly rely on the relative performance appraisal system in political incentives, such as dependence. Although there are corresponding counter measures of the local government to the incentive mechanism of a higher level, and even this game will produce a certain result of the efficiency losses, the overall, the fiscal decentralization played an active role in promoting local economic growth. The analysis supports the conclusion.Empirical analysis showed that China's fiscal decentralization reform played a relatively good incentives on promoting regional economic growth, but not significant in promoting local economic equipoise development, to some extent, as the strength propellant widen the local economic gap, especially in supporting mechanisms lag.The lack as follows: First, the structure of fiscal expenditure imbalance lead to greatly reduced of regulate social conflicts of benefits and the other is the main tool of fiscal revenue does not play an effective balance on various benefits of structural transformation and ease the distribute contradictory; Third, under the traditional framework, fiscal policy and role can not be full.This decentralized increasing tax revenue competition, widening extra budgetary income, separating between performance appraisal system and the afairs. At the same time, other supporting mechanisms including the financial transfer lag offset the expected fiscal decentralization, local protectionism strengthen the inter-regional disparities. As the effective implementation of fiscal policy carrier, the fiscal decentralization should pay attention to the organic integration of efficiency and fairness in the process of promoting local economic development. Not only concern about regional economic growth, but also concern of narrow the income gap and promote the social welfare in order to the local economy equipoise development.Local economic development needs to build a harmonious fiscal decentralization to accommodate growth and distribution. To build a harmonious fiscal decentralization, the principle embodied are: First, to provide high-quality public goods and services; Second, to coordinate and cooperate on both efficiency and fairness; Third, to improve social welfare.Handle the following: First, deal with muti-level governments relationship; second, the relationship between centralized and decentralized is very important; Third, handling the financial expenditure and income; Fourth, properly handle the central and local government incentives relations.Improve the policy basis: First, create a service-oriented government to promote local economic development; Second, compress of the branch and save the financial cost; Third, establish of local governments horizontal coordination mechanism to reduce local Barriers; Fourth is to improve the intergovernmental monitoring and information communication mechanism. And the routing focus on: First, further standardize the scope of rights and expenditure, and the other is a reasonable division of the intergovernmental financial rights, and standardize non-tax revenue, adjustment aspects of legislative and income, The use of tax revenue (distribution) rights and other, gradually establish a harmonious environment; Third, accelerate the improvement of government transfer system, not the general transfer, but the special and the province following ones, gradually expand the scope of transfer to the county or town, and narrowing the gap in the following; The last, strengthen the budget supervision and management capacity, increase the level of incentives, increase management capabilities and management strength, and improve the performance of local government officials assessment mechanism and evaluation system ,hardening budget constraints, encourage local departments to strengthen coordination and cooperation. Also improve the mechanism for supporting the building: First to promote the optimization and upgrading of industrial structure and the other is to speed up and broaden the financing channels to support local economic development; third, constantly improve the social security system.