Fiscal Incentive Research On Local Public Goods Provision Perspective Of Capitalization

China is in the transformation of improving socialist market economy. After years of rapid economic growth, the local government performance in the field of public goods provision has not been approved, according to the United Nations Development Program, in 2012 China's human development index is 0.699, only 101st ranked among the 187 countries which have the statistical index. The public is not satisfied with the education, medical services, and in recent years the haze covering large-scale China's land area in the winter highlights the embarrassment of local governments'effort for environmental protection, which reminds us the cost of environmental degradation by local governments'too much preference on economic development. Therefore, how to improve local governments' incentive is not only an important problem for domestic academia, but also reality need to enhance fiscal governance ability.Indeed, many aspects of society such as politics, economy and culture can influence local government behavior incentive for public goods provision. However, Classical Economics thought represented by Henry George and the mainstream theory of fiscal decentralization based on Tiebout Model both resort to the real estate market and the relevant government revenue system, which fully shows that the real estate market plays an important role in the public goods supply and demand equilibrium mechanism. Owing to the inspiration of these studies, western developed countries' (such as America) local government established a revenue system based on property tax as the main financing mechanism of local public goods.Since the foundation of PRC, limited by the land property rights system and other reasons, real estate market did not came out immediately in China. But after the land market reform in 1980s and housing commercialization reform in 1998, the real estate market began to develop and gradually mature; On the other hand, after the 1994 reform of the financial system, although not imposing the strict sense real estate tax, but the real estate market fiscal revenue (including public land leasing revenue and real estate related tax) has become important for local government. Thus, despite the difference of specific revenue instrument, China and Western countries constructed local revenue system based on land. Is this a coincidence, or internal logical necessity? What kind of impact on local government incentive by the series of reforms? Further, does the difference between real estate income instruments lead to the differences in behavior patterns and the incentive structure of the local government? Whether this implies Chinese institutional improvement? This paper aims to answer these questions.The core idea is:the revenue institution is an important factor to determine the incentive of local government behavior. Because of the land can be used as a carrier paying for public good, land value based revenue can give local government intrinsic motivation responding to the needs of the residents, which should be the basis of local revenue system in the reform process oriented public interest. Applying normative analysis, historical analysis, quantitative analysis combined with the case study, the basic framework of the thesis is:under the guidance of the existing study on local government fiscal incentive of public goods provision from the perspective of capitalization, combined with China's realistic background analyses the difference of the incentive mechanism, finally put forward the policy suggestions on the reform of Chinese real estate revenue system. The full text is divided into 8 chapters, as following:The first chapter is introduction, which defines the main concepts used, expounds the research assumptions, methods, the framework and the main innovations and shortcomings. The second chapter is literature review, containing fiscal incentives on local public goods provision and especially from the perspective of capitalization relying on the real estate market. Next the theory analysis shows how the real estate revenue fiscal incentives on local governments after capitalization which is regarded as public good demand expression in the third chapter. The fourth chapter studies China's real estate market and fiscal system reform (the tax assignment reform in 1994) to illustrate the applicability of the fiscal incentive mechanism from the angle of public goods capitalization, which has gradually become an important incentive mechanism of the leading local government behavior. In the fifth chapter begin empirical analysis, which tests the existence of public goods capitalization, so as to provide the premise condition to produce fiscal incentive. The sixth chapter is the empirical analysis of the fiscal incentive effects:due to the public goods capitalization effect, the local government have the motivation to increase real estate transactions revenue by providing good public goods to attract population settled in the jurisdiction, but the land leasing incentive effect on education expenditure is not obvious. The seventh chapter is Xiamen's PX project case study, which means there is space to improve the existing real estate revenue system by showing that local governments have different fiscal incentives before and after the community development. The eighth chapter summarizes the full text:revenue system reform associated with the value of the land should be the core of local finance construction in the future, which is of important significance for public interest oriented reform of China's local government.The innovation of this paper includes the following:First, this paper brings forward the research of local governments' public goods supply incentive. With the evolution of economic structure and fiscal institution, especially the development of the real estate market, and the redefinition of financial system reform, China's local government's fiscal incentive has changed. Local governments have incentive to use the principle of capitalization to attract population flows through supplying infrastructure, education and other public goods, so as to promote the development of the real estate industry, which combines satisfying public goods demand and fiscal revenue together, not just for reasons of attracting capital to promote economic growth within their respective jurisdictions.Second, owing to China's current trading type of real estate revenue system, different with the real estate tax, the effect of fiscal incentives are different. Using case study, this paper shows China local governments have different effort preference for public goods supply before and after land and real estate transactions, which leads to a space and time distortion of incentives, hindering local government's further transformation to "service-oriented".Third, this paper investigates the local government behavior from the fiscal incentive perspective, combining the local fiscal revenue and expenditure activities into a unified framework. With the objective of improving local governments' effort to meet the public goods demand, this paper gives a standardized analysis framework for revenue assignment. A revenue system giving the resident a chance to pay for the public good should be designed in the current fiscal decentralization so as to form the persistence fiscal incentive on local government behavior, which means meeting the public goods demand preferences and their own financial interests achieve an incentive compatible.