The Study On The Relations Of Financial And Administrative Power Between The Central And Local Government By Quantitative Analysis

In the literature of public fiscal theories in the West, the scholars have proved the necessity of government hierarchy and the separation of fiscal power through the governmental function theory and the features of hierarchy and space for public goods. The separation of fiscal power between the Center and local government is put forward to facilitate the public supply of different levers by different governments. Thus, forming a core issue of the Financial System—the problem of division of financial and administrative power between the Central and local government. The implementation of revenue sharing system in China in 1994 is a landmark of the fiscal reform with the establishment of fiscal framework of revenue sharing and hierarchy. However, the characteristics of the old system remain in the new revenue sharing system and the relation between the central and local responsibility is almost not brought into, which is an expedience. The increasing financial difficulty has affected negatively the economic functions of local governments, unless the trend is curbed, the financial difficulties of local governments may eventually reduce the state revenue, and further hinder the national economic growth and undermine the regime. So, the research of the financial and administrative power relations between governments has become a significant subject of finance and government economics either in theory or for practice. As we all know our governments have two main purposes, the first is making economic more effective; the second is making our society is more equity. So we will use some economic dates and set models to have quantitative study. We hope we can find some direct results from these models to help the further research. Chapter 1,it gives introduction about base theory of the financial and administrative power relations between central and local governments. This section discusses the public finance theory, theory of public goods, the government functions. All of these are base theories for the further research.Chapter 2, Study the history of the financial and administrative reformation in china. This section discusses the development of these theories and reasons in chronological order, analyzing the special characteristics of the fiscal system, making a study of the relationship between our country and the theory of fiscal decentralization.Chapter 3, Study of efficiency on fiscal income between central government and local government. In order to know how much income the governments get, and how much effect it is on economic development. The result of quantitative study shows that out of project income have the adverse effect on economic, it has different effect on economic after the Reformation of Fiscal system in 1994. The income ratio between central government and local government is unreasonable, more financial resources belong to central government.Chapter 4, Study of efficiency on fiscal expenditure between central government and local government. Through making Cobb Douglas Production Function model, the result shows that local governments have not enough financial resources to complete their increasing affairs. Because too more financial resources are belong to central government. Then compute the indicator of the fiscal decentralization and set a model, which is pointing that there is no direct fact to improve they have close relationship.Chapter 5, it focuses on social equity from our country's fiscal decentralization reform. In this section the purpose is to make a research on intergovernmental fiscal transfers. We compute different Gini Coefficients as the indicator for the social equity. These Gini Coefficients are differing from city and country, which is more with our country's realistic. After quantitative study, we find that there is far from enough fiscal transfers, and it's less effective for fiscal transfers made in city than it does in country. So we conclude that properly designed intergovernmental fiscal transfer system will produce efficient incentives to sub-national governments, and fiscal system's operational efficiency.