Fiscal Decentralization And Upgrading Of Industrial Structure: Effect And Mechanism

After more than 30 years of continuous rapid growth,economic growth is slowing down,entering the "new normal" phase.The old model of rapid economic growth through excessive consumption of resources and the employment of large quantities of cheap labor is no longer valid.Accelerating the adjustment of industrial structure and promoting the upgrading of industries to the middle and high end are the main directions of current economic development.The report of the 19 th national congress of the communist party of China pointed out that we must support the upgrading of traditional industries,accelerate the development of modern service industries,and aim to raise international standards.And the driving force of industrial structure upgrading comes from two aspects,that is efficient market and effective government.Under the background of the new normal,China remains in an important period of strategic opportunities where much can be done.According to the characteristics of various industries,we need to give full play to the role of an efficient market and an effective government,making the market play a crucial role in the allocation of resources,and making better use of the role of the government in promoting the upgrading of the industrial structure.The effective play of the role of the government is affected by financial system arrangement whose core is fiscal decentralization.Fiscal decentralization,to a large extent,determines the abundance of local government financial resources and the behavior of local governments,and then has a direct or indirect impact on the upgrading of industrial structure.Therefore,this paper attempts to bring the fiscal decentralization system into the theoretical analysis framework of industrial development to explore the effect of fiscal decentralization on industrial structure upgrading and its inherent mechanisms.Starting from the realistic background that China is currently in the new normal of economy and facing the transformation and upgrading of industrial structure,and based on the characteristics of China's financial system which combines economic decentralization and political centralization,we make a theoretical analysis on the effect of fiscal decentralization on the industrial structure upgrading and inherent mechanisms,and test the influencing pathways and mechanisms of fiscal decentralization on the industrial structure upgrading.This paper focuses on the core research theme of fiscal decentralization and industrial structure upgrading,discussing systematically the following questions,including “In thecontext of rapid flow of factor resources across regions and regional economic integration,whether is there a spatial correlation in the upgrading of industrial structure in various regions?”,“As an important financial system arrangement in China,does the fiscal decentralization system have spatial spillover effect on the industrial structure upgrading?”,“For regions at different levels of industrial structure,how does fiscal decentralization affect the upgrading of industrial structure?”,“The reform of ‘province-managing-county' is taken as an effective index to depict strict exogenous fiscal decentralization,what kind of influences did it produce to the county industrial structure optimization and promotion?”,and “What are the inherent mechanism chains that fiscal decentralization influences industrial structure upgrading”.Here are the basic conclusions,firstly,regional industrial structure upgrading has a significant positive spatial correlation;Secondly,fiscal decentralization has a positive spatial spillover effect on the upgrading of industrial structure;Thirdly,with the upgrading of industrial structure moving from low quantiles to high quantiles,the positive influence of fiscal decentralization on the upgrading of industrial structure shows a trend of gradual increase;In addition,the province-managing-county reform significantly promotes the county industrial structure upgrading and the effect tends to rise over time,that is the increase of fiscal decentralization helps to promote regional upgrading of industrial structure;The last but not least,fiscal decentralization plays an indirect role in the upgrading of industrial structure through three internal transmission paths: foreign direct investment,regional innovation efficiency and financial development.Main contents and general structure scheme of this dissertation are as follows:The first chapter is introduction.This part introduces the background and the meaning of study of the paper,some fundamental concepts,and expounds the main content and research methods,research ideas and basic framework of the paper,then points out the innovation points of the paper.The second chapter includes theoretical basis and literature review.This part firstly reviews the fiscal decentralization theory,including the first generation of fiscal decentralization theory and the second generation of fiscal decentralization theory,and the relative theory about industrial structure includes industrial structure evolution theory and industrial structure upgrade theory.Then we reviews relevant literatures on fiscal decentralization and industrial structure upgrading,in this part,firstly,we summarize therelevant studies on the economic effects of fiscal decentralization,including economic growth,market segmentation,urban-rural income gap,public expenditure structure and environmental pollution.Secondly,the relevant research on industrial structure upgrading is summarized.Thirdly,we emphatically reviews and summarizes the relevant literature on the relationship between fiscal decentralization and industrial structure upgrading.Finally,combining with the shortcomings of the existing literature,we give a brief comment of the literature.The third chapter is the theoretical analysis on the influence and mechanism of fiscal decentralization on industrial structure upgrading.This part mainly includes two aspects,and we firstly make a theoretical analysis of the impact of fiscal decentralization on industrial structure upgrading,and then make a theoretical analysis on the inherent mechanism of the impact of fiscal decentralization on industrial structure upgrading.The analysis of the influence mechanism is carried out under the framework of the selective and functional roles of local governments,taking the selective and functional roles of local governments in industrial structure upgrading under fiscal decentralization as the starting point,and regarding foreign direct investment,regional innovation efficiency and financial development as the typical research objects.We attempt to reveal the internal transmission path of fiscal decentralization on industrial structure upgrading from the above three aspects.The fourth chapter is the empirical test of the impact of fiscal decentralization on industrial structure upgrading: empirical evidence from spatial panel model.Based on the existing theoretical analysis,this part provides empirical evidence for the influence of fiscal decentralization on industrial structure upgrading.Firstly,based on the typical facts of the spatial correlation of the fiscal decentralization of local governments and the spatial dependence of the upgrading of industrial structure,we construct spatial durbin model(SDM)and bring fiscal decentralization and industrial structure upgrading into the same research framework.We introduced the geographical adjacency weight weight matrix,the geographical distance weight matrix and the economic distance weight matrix which reflect the regional similarity into the spatial durbin model,testing the overall effect of fiscal decentralization on industrial structure upgrading empirically.Secondly,we conduct a battery of robustness checks by changing estimation methods,using new indicator of fiscal decentralization and using new indicator of industrial structure upgrading.Finally,the quantile regression model is used to further investigate the impact of fiscal decentralization on the upgrading of industrialstructure in regions at different levels of industrial structure.The fifth chapter is the empirical test of the impact of fiscal decentralization on industrial structure upgrading: empirical evidence from quasi-natural experiments.In order to overcome the endogenous problem in the inference of causal effect,this part takes the provincemanaging-county reform as a quasi-natural experiment,and apply the difference-in-difference method to infer the causal effect of fiscal decentralization on industrial structure upgrading.The province-managing-county reform endows counties directly under the supervision of the provincial government with more fiscal revenue and spending power and economic autonomy,thus strengthens the degree of fiscal decentralization of county-level governments,and this quasi-natural experiment provides exogenous indicators for fiscal decentralization.In this chapter,We make a special effort to check out the recognition conditions of the difference-in-difference method,and a series of robustness tests are carried out after the estimation of difference-in-difference model,including changing research samples,replacing industrial structure upgrading indicators,counterfactual test,placebo test,DID effect test of covariates and dynamic heterogeneity causal effect test.The sixth chapter is the empirical test of the influence mechanism of fiscal decentralization on industrial structure upgrading.Based on the existing theoretical analysis,empirical evidence is provided for the indirect impact of fiscal decentralization on industrial structure upgrading.This part is based on the selective and functional role of local government under a fiscal decentralization system,and based on the mediating effect model,we take foreign direct investment,regional innovation efficiency and financial development as its typical representatives to empirically examines the inherent mechanism of fiscal decentralization affecting industrial structure upgrading.The seventh chapter includes the main conclusions and policy recommendations.This part summarizes the main research conclusions of chapter 4,chapter 5 and chapter 6.At the same time,corresponding policy suggestions are put forward based on the existing research conclusions.The innovation of this paper is mainly reflected in the research perspective and research methods.In terms of research perspective innovation,it mainly includes the following two aspects:Firstly,This paper study the heterogeneity of the impact of fiscal decentralization on theupgrading of industrial structure.The heterogeneity of the impact of fiscal decentralization on industrial structure upgrading has not been considered in the existing literature.In this paper,the quantile regression model is used to investigate the differences in the impact of fiscal decentralization on the upgrading of industrial structure in different regions.Secondly,This paper studies theoretically and empirically the internal mechanism of the impact of fiscal decentralization on industrial structure upgrading.Regarding the foreign direct investment,regional innovation efficiency and financial development as the typical research objects,we attempt to reveal the inherent mechanism of fiscal decentralization on industrial structure upgrading from the above three aspects.In terms of research method innovation,it mainly includes the following two aspects:Firstly,based on the spatial econometric model,this paper studies the spatial spillover effect of fiscal decentralization on the upgrading of industrial structure.Due to the influence of geographical location,economic development level and industrial correlation,the spatial correlation of industrial structure among provinces in China is objective.Meanwhile,considering that the spillover of local government behaviors brought by fiscal decentralization system further strengthens the spatial correlation of industrial development,it is necessary to include spatial dependence among regions into the model.In this paper,the spatial econometric model is used to capture the spatial agglomeration characteristics of China's industrial structure in the process of upgrading and the spatial dependence and spillover characteristics of local government behaviors under fiscal decentralization.Secondly,this part takes the province-managing-county reform as a quasi-natural experiment,and applys the difference-in-difference method to infer the causal effect of fiscal decentralization on industrial structure upgrading to overcome the endogenous problem in causal inference.The province-managing-county reform endows counties directly under the supervision of the provincial government with more fiscal revenue and spending power and economic autonomy,thus strengthens the degree of fiscal decentralization of county-level governments,and this quasi-natural experiment provides exogenous indicators for fiscal decentralization.