The Local Governmental Behavior Patterns And Economic Development

Decentralization in economic affairs has been put into practice after market-based reform in China. Each local government is not an interest group that represents the common interest of certain regional segments. It is an independent interest body, which pursuits its special interest subject to the specific institutional arrangements. So local governments have all kinds of behavior patterns. In this essay, first, we look the local governments as a leading team, which take a crucial part in all the local affairs, which be led by the chief leader of the local party committee. Second, we analyze the objects, the approach to realize them, and the institutional environments of the local governments. Then we set up a two-stage decision model to put across the different patterns of the local governments. In the first stage, a local government must decide on how to allocate its energy between rent seeking and economic developing. We set up "a local governmental energy allocating model" to explain the first stage. In the second stage, in order to develop the economy, a local government must choose between the protectionism strategy and the competition strategy. We set up game models named as "a local governmental competition strategy choosing model" to describe this stage.Through the upward analysis, we can see, it is the institutional environments faced by the local governments that determines whether the local governmental interest is compatible with the economic development and the common local interest. Therefore, it is necessary for the central government to improve the environments of the relative lagged local. The improvement of appraising indices and monitoring patterns and the emphasizing of scientific developing conception can influence the marginal revenue line or marginal cost line of the local governments, then change the equilibrium of the energy allocation. Furthermore, transferring the appraising power to a lower level is the fundamental way to improve the local governmental behavior patterns. On the other hand, to overcome the protectionism entails the creations of institutions by the central government that so structures the rules and their enforcementas to alter the pay-offs to induce cooperative solutions. Through harmonizing the behavior of the local governments, the central government can reduce the transactional costs between each local government. In the further process of economic developing, local governments have immanent motility to raise the level of endeavor in developing economy and take the competition strategy.