A Study On The Role Of Local Government In Financial Industrial Agglomeration In China

In recent years, as the intensified globalization and dramatic change of international economy, the step of regional financial industrial agglomeration has obviously spedup in China and more cities clearly put forward goal that is to develop into an international financial industrial agglomeration area or national financial industrial agglomeration area or regional financial industrial agglomeration area. In this background, local governments always play a role in the process of pushing forward the regional financial industrial agglomeration through various means, and further attract a lot of financial resources. However, in practice, the problem of misplace, offside and lack of local government function still highlights, local government’s preferential policies attract only institutions into a particular space and not lead to the combined effect of financial industrial agglomeration. Therefore, in order to advance sound development of financial industry, study on the role of local government in regional financial industrial agglomeration has important theoretical and practical significance.Employing Game Theory, Analytic Hierarchy Process(AHP) and Questionnaire, the goal of the thesis is to make a systematic, dynamic and quantitative study on the role of local government in regional financial industrial agglomeration by establishing analytical framework of the role of local government in financial industrial agglomeration.The structure of the thesis’s main body is compound, that is "Theoretical-Game-Positive" structure form the main line of the role of the local government. In part of game analysis, the thesis analyzes local government behavior according to public choice theory, then makes two theoretic hypotheses:economic man and limited ration. Meanwhile, this thesis proposes external factors that restricted the role of local government in financial industrial agglomeration, that include fiscal decentralization, performance evaluation mechanism, promotion mechanisms and local government officials for rent. Based on this, the thesis sets up a game model to imitate the game activities and concludes that:Firstly, the thesis analyzes game behavior between central government and local government by establishing Model of Evolutionary Game Theory, the results show that the support in making policies of central government and expected benefits from game playing between central government and local government will determine the game playing tactics of local government in advancing financial industrial agglomeration. Secondly, the thesis analyzes game behavior between local governments by establishing Cournot Model and Stackelberg Model, the results show that in the condition of local governments which are entirely rational acting simultaneously and every part in game playing not existing information asymmetry, the pubic administration capability of local governments will greatly affect the development of financial industrial agglomeration; in the condition of local governments which are irrational or bounded rationality, local governments will be at a disadvantage in the game because of competition of local governments each other; in the condition of local governments which act not simultaneously and the secondly actors can quickly observe the action of the first actors, the number of potential financial institutions entrant which the first actors introduce is greater than the number in the case of simultaneous actions. Thirdly, the thesis analyzes game behavior between local government and potential financial institutions entrant by establishing Auction Model and Hotelling Model, the results show that in the condition of local governments’homogenization, the stimulating financial policy will be the main factor which will decide the selection of potential financial institutions entrant. If not, the transaction costs will decide the reputation effect of the local government. If local governments are almost the same in reputation effect, the better one will win during financial industrial agglomeration even if it offers a lower price than the one of worse reputation effect.Combined with theoretical analysis, game theory analysis and empirical study, this thesis intends to build a indication system,which includes 7 second-level and 29 third-level indicators, for measuring the role of local government in financial industrial agglomeration from three aspects of public service, policy guidance and market supervision, and then adopts analytic hierarchy process for evaluating and comparing the role of local government in financial industrial agglomeration among Beijing, Shanghai, Shenzhen, Guangzhou and Tianjin. What’s more, it tries to find out the emphasis and deficiency of the role of local government in the process of advancing financial industrial agglomeration through empirical analysis. At last, this thesis puts forward suggestions that adopted by local governments if they want to make better in advancing financial industrial agglomeration.This thesis gives new ideas as following. Firstly, Based on the basic functions of local government, this thesis intends to build a indication system,which includes 7 second-level and 29 third-level indicators, for measuring the role of local government in financial industrial agglomeration from three aspects of public service, policy guidance and market supervision. Secondly, it trys to study the role of local government in financial industrial agglomeration from the perspective of game behavior. The thesis makes two theoretic hypotheses:economic man and limited ration, and then proposes external factors that restricted the role of local government in financial industrial agglomeration, that include fiscal decentralization, performance evaluation mechanism, promotion mechanisms and local government officials for rent. Based on this, the thesis sets up a analytical framework of the role of local government in financial industrial agglomeration by employing the game approach, expecting conclusions can illustrate economic phenomena existing in financial industrial agglomeration to some extent. Thirdly, this thesis puts forward suggestions that adopted by local governments to advance financial industrial agglomeration from the perspective of eliminating diseconomies of financial industrial agglomeration. Due to the irrational behavior of local government, financial industrial agglomeration may appear diseconomies of scale. Therefore, the thesis puts forward suggestions that adopted by local governments to eliminate diseconomies of financial industrial agglomeration, including making financial industrial agglomeration plan scientifically, specification of investor and capital attracting behavior, control of financial institutions access, strengthening prevention and control of financial risks.There are flaws in this thesis. In future studies, indication system of the role of local government will further be improved in order to pursue a new height and depth in study.