Fiscal Competition Strategy In Ethnic Areas

Since the implementation of the tax-sharing system in 1994,local governments have gradually acquired the power of administration and finance.Local governments,guided by the policy of economic construction as the center,have launched the "GDP Championship".Local governments compete around economic growth,and tax competition and public expenditure competition have become the core of expanding tax base among local governments.Local governments reduce and exempt taxes,develop tax preferences,and provide high-quality public goods to attract capital and residents and expand the tax base.Fiscal competition among local governments brought about by fiscal decentralization constitutes an important pattern of government competition.At present,there are three forms of fiscal competition among local governments:fiscal expenditure competition,tax competition and transfer payment competition.How to deal with the financial competition of neighboring local governments is an important problem for many local governments.The local government's strategy to cope with the financial competition of neighboring local governments has become the most important.In theory,there are two views on the strategy of fiscal competition.One is that the competition of fiscal revenue leads to the reduction of tax burden and revenue of local governments,and local governments are unable to provide public goods,thus forming a "bottom line" competition.Another strategic viewpoint is that the competition of fiscal revenue is not to reduce the tax burden.Local governments have the ability to increase the tax burden,so as to expand fiscal revenue and protect public goods expenditure(the new economic geography theory).There has been a constant debate over fiscal competition.First,whether tax competition and public expenditure competition are alternative or complementary competition strategies?Secondly,how to deal with the low tax burden policy of the neighboring local governments?Is it tax burden policy or public expenditure policy?Or is it flexible to adopt two strategies?Furthermore,what are the outcomes of these strategies?In view of the above problems,this paper carries out systematic and innovative solutions.This paper extends from general equilibrium analysis to partial equilibrium analysis.Through game theory and spatial econometrics,it not only systematically summarizes the theoretical model of fiscal competition,but also judges and measures the actual situation of tax competition strategy and public expenditure competition strategy of local governments in ethnic regions.The main contents and conclusions of this paper are as follows:Firstly,this paper validates the hypothesis of financial competition.The reason why local governments compete in tax revenue and public expenditure is mainly to compete for population and capital.Whether the population migrates with public expenditure is one of the important premise hypothesis.Taking residents,producers and government as the starting point of general equilibrium analysis,this paper theoretically demonstrates the mechanism of attracting population migration by public expenditure,and then uses threshold regression method to analyze the concave relationship between productive public expenditure and household registration migration,as well as the concave relationship between consumer public expenditure and household registration migration.This paper clarifies the internal law of household registration population migrating by choosing public goods,and also determines the effectiveness of public expenditure,a means of financial competition.Secondly,this paper makes a game analysis on the tax competition strategy of local governments,and verifies the tax competition strategy in ethnic areas.With the help of evolutionary game theory,two steady-state game strategy combinations are analyzed:the game strategy combinations of raising tax burden mutually and the game strategy combinations of reducing tax burden mutually.Based on the above game analysis,this paper validates the tax burden competition strategy of prefecture-level municipal governments in ethnic regions,and finds that the tax burden competition strategy among local governments in ethnic regions is a strategy of gradually increasing tax burden.This complementary tax burden competition strategy avoids the theoretical "bottom-line competition".Thirdly,this paper uses game theory to analyze the basic framework of local government's public expenditure game,finds three equilibrium strategies of public expenditure competition strategy,and then finds two stable evolutionary game strategies through evolutionary game analysis:(1)local government 1 raises public expenditure,local government 2 raises public expenditure,and(2)local government1 reduces public expenditure,local government 2 reduce public expenditure.Then this paper measures the public expenditure in minority areas,and finds that the strategies adopted by local governments in the competition of financial expenditure such as education expenditure,social security expenditure,medical expenditure and investment expenditure in minority areas are complementary and imitative strategies,that is,the adjacent local governments increase their financial expenditure,so the local governments strategy is to follow up and increase their financial expenditure.Fourthly,this paper analyses the mixed competition strategy of tax burden and public expenditure in fiscal competition strategy.Using game theory,this paper finds that there are four combinations of steady-state evolutionary game strategies in the mixed game of local governments.Then this paper examines the existence of mixed competition strategies between local governments of ethnic minorities.There are complementary strategies as well as alternative strategies.In the face of the public goods expenditure strategy of the minority areas,the local governments show different strategies.For the education expenditure and social security expenditure,the local tax burden strategy is complementary;in the face of the mixed competition strategy of medical expenditure,the local municipalities adopt the alternative strategy of reducing tax burden.This paper proves that there is a mixed competition strategy between tax burden and public expenditure in Tiebout theory.Fifthly,the combination strategy of public expenditure and tax burden in fiscal competition strategy is analyzed.Through the detection of the choice of the strategy combination mode of government competition in minority areas,this paper finds that the tax burden among local governments is gradually increased to ensure the development mode of public expenditure.Thus,the paper gives a clear answer to the strategy model of local governments in minority areas in dealing with public expenditure and tax burden competition.Sixth,this paper focuses on the transfer payment policy,and analyses the policy solutions of fiscal competition strategy.With the help of production function model,this paper demonstrates that transfer payment strategy influences fiscal competition strategy through contribution rate and return rate of transfer payment.The analysis finds that the transfer payment strategy only strengthens or weakens the fiscal competition strategy,and can not fundamentally change the fiscal competition strategy.Therefore,transfer payment strategy has the function of restraining financial competition strategy.