Study On The Competitive Efficiency Of Local Governments And Its Institutional Causes

Under China's fiscal federalism,the competition between local governments has brought about high economic growth,but also produced many negative effects.In the economic "New Normal" period,the local governments' competitive goals need to change.The reform of fiscal institutions,which conforms to the structural reform of the supply front,is not only the key to guarantee the effective competition of local governments,but also the urgent requirement of reform under the new situation.Based on this,this paper mainly evaluates the competitive efficiency of local governments in China and analyzes the impact of institutional arrangement on the efficiency of local government competition.This paper first defines the performance of effective competition and ineffective competition of local governments,and analyzes how the fiscal institutions of effective competition of local governments should be arranged by normative analysis.The competition between local governments explains the miracle of China's economic growth,but it also lead to problems such as inadequate public goods supply,local protectionism,redundant construction,deterioration of resources and environment,and unfair distribution among regions.So the ineffective competition between local governments not only undermines the efficiency of public resource allocation,but also causes the loss of market economy efficiency.The market needs to remain competitive,and the government also needs competition to produce efficiency,but the effective competition of local governments requires conditions.Competition may not be efficient,and cooperation may not be inefficient,whether it is competition or cooperation need to be moderate,excessive will produce inefficiency.The reasonable arrangement of the fiscal institutions is the key to ensure the effective competition of local governments.The impact of government on the efficiency of resource allocation is achieved through the arrangement of public budget revenue and expenditure,and the vertical distribution relationship between the governments will also affect the income and expenditure of local governments.If the fiscal institution is arranged reasonably,it will not distort the behavior of the local government,nor will it cause the loss of the efficiency of resource allocation,so that the competitive behavior of the local government can be restrained.So the effective competition of local governments requires the co-ordination of fiscal institutions.In order to ensure the effective competition of the local government,it should be based on tax neutral and budget neutral as the premise,and co-ordination arrangement of taxation system,the budget system and the tax-sharing system to build both cooperation and competition mechanism.Based on this normative analysis,the following chapters are the empirical analysis.First,the paper analyzes the competition situation of local governments in China,and then evaluates the efficiency of local governments' competition with the efficiency of public economy and market economy as the standard.Finally,the paper analyzes the institutional reasons of ineffective competition of local government.Through the empirical analysis,the following conclusions are obtained:First,there are significant tax competition and public expenditure competition between local governments.Under the fiscal federalism,investment is an important means to promote economic growth,and also the main way to expand the tax base.Local governments attarct investment mainly by tax incentives and public expenditure policies.In order to attract capital,they must start fierce competition activities.As the main tax that affects the cost of the enterprise,the tax competition of local governments is mainly about the relative competition of the "shared tax",while the public expenditure competition shows the comparing competition of public expenditure and economic construction expenditure.Second,the existence of local government competition is beyond doubt.Under fiscal federalism in China,this competition shows the competitive characteristics of attracting investment,its essence is to attract investment to form economies of scale,thus expanding the tax base to increase local income,but this competition is not efficient.The "race to the bottom" of tax competition and "comparing with each other"of public expenditure competition will lead to the lack of public supply,the waste of public funds and the unresonable structure of expenditure,which distorts the allocation efficiency of public resources.And the efficiency of local governments'competition varies from region to region.Because of the competitive advantage,the central and western region can not successfully attract resources even by fiscal competition.Extensive competition expands the disparity in fiscal compacity among different regions,making the inefficiency of public supply of the central and western regions.At the same time,the tax competition and public expenditure competition of local governments promotes the accumulation of capitcal and the formation of scale economies,but it promotes the economic growth at the loss of social welfare.And this effect also has regional differences.Because of resources endowment advantage,the eastern region has inherent advantages in the competition,the central and western regions are still in the initial stage of economies of scale,their competitiveness are not as good as the eastern region.If they blindly take the preferential tax or expand the economic construction expenditure for competition chips,they easily fall into the adverse cycle of ineffective competition,which is failing to attract capital,resulting in inadequate public supply and welfare loss,thus forming the "Matthew effect."Third,the ineffective competition between local governments is due to the unreasonable arrangement of fiscal institutions,which has produced negative incentives for the behavior of local governments.Budget "soft constraints",large sharing proportion and large proportion of special transfer expenditure will distort the local government revenue and expenditure behavior,and intensify the competition between local governments.Budget "soft constraints" can not effectively restrain the behavior of local governments,so that local governments can compete with others by reducing the effective tax rate and expanding the public expenditure.The less developed regions will be more dependent on the transfer expenditure becase of the tax sharing which widens the gap of the competitiveness of regions.At the same time,the proportion of special transfer expenditure in China's transfer payment structure is relatively large,which will further intensify the competition of local governments for its characters of low transparency and strong camera,thus forming an adverse competition cycle.Through further analysis of the impact of fiscal institutions arrangement on the efficiency of local government competition,the empirical results show that the unreseasonable arrangement of fiscal institutions has led to the inefficiency competition of local governments.First,the budget "soft constraints" can not effectively restrain the behavior of local governments,while reducing the cost of local governments'ineffective competition,making the local governments' ineffective competition to continue.Second,the tax sharing in China focuses on the distribution of tax revenue between the central governmet and local govemmet,not attaching importance to the local taxe construction.The main local tax revenue comes from the"shared" tax income,the large sharing proportion will lead to excessive competition of local governments for greater revenues and economic scale.And this way of sharing has further expands the disparity in fiscal compacity among regions,making the cost of public goods between regions unfair.This has not only increased the pressure of central transfer expenditure,but also widened the gap of the competitiveness of regions,which is the main reason for the ineffectiveness competition of local governments.Third,the transfer expenditure structure should be optimized.The use of the special transfer expenditure is low efficiency because of its charaters of specified use,strong camera,matching funds requirement and low transparency.The large proportion of special transfer expenditure has failured to balance the disparity in fiscal compacity among regions,and also has failured to weaken the excessive competition of local governments.Therefore,in the period of new normal economy,we need to further reform the fiscal institutions in order to construct moderate and orderly competition.This is the economic development requirements under new situation,but also the structural reform requirements of the supply-front.But the reform of the fiscal institutions can not be achieved overnight,it needs for top-level design and promotes gradually.First of all,promote tax reform in the principle of tax neutrality.To separate tax categories according to the characteristics of reproduction,setting the general tax in the principle of "Comprehensive",setting the selected tax in the principle of "Simplified",and ensuring the consistent of tax and expenditure needs in the principle of "Unified".Second,further harden the budget system and improve budget transparency.Ensure the budget neutrality by the "tax-and-spend" way of tax designing and the reform of separating revenue and expenditure,and gurantee the budget hard constraints by strictly defining the boundaries of different public budgets.At the same time,improve the visibility of budget information and the supervision mechanism.Finally,deepen the tax-sharing and transfer expenditure system reform.Confirm the corresponding authority among all the levels of the government,and build central taxation system and local taxation system.According to the mobility of taxes,allocate the goods and services tax and production factors tax to the central government,which forms the grant fund after satisfying the expenditure demand of the central level,and divide the rest to local governments according to the standard revenue and expenditure formula.At the same time,improving the local taxation system construction ensures a more reasonable allocation of the cost of local public goods.