The Relationship Between Fiscal Decentralization And Economic Growth

Since the 20^th century, almost every country has taken the fiscal decentralization reform. Facing with the end of such reform, lots of scholars analyzed the consequences. The relationship between fiscal decentralization and economic growth has received more attention. Scholars have mostly focused on some evidence work, rather than deeper research on the working mechanism between them. On the basis of summing up the economics literature of the causal relationship between the two, this paper emphasizes particularly the mechanism, and analyzes the Chinese situation evidently.Based on introducing some hypothesis, the author studies economic growth working on fiscal decentralization in the respects on the channels of revenue — demand effect, the intermediate—demand effect and the supply effect. At the same time, the working mechanisms of fiscal decentralization to economic growth are discussed in the aspects of the resource collocation effect and the institutional environment effect. In addition, economic growth has maintained at the rate of 8% with the reform of fiscal decentralization in China since 1994. According to this paper takes four indexes evaluating fiscal decentralization, making use of time-series data and Solow model, to analyze the relationship between it and economic growth in China, and such conclusion is made as follows: fiscal decentralization has promoted the economy, and there is positive relationship between the two.