Fiscal Decentralization On Land The Financial Implications Of The Empirical Analysis

From the perspective of fiscal decentralization, this paper explores the mechanism behind the land-based finance of local government. We conclude that unbalance between financial revenue and expenditure causes the land-based finance. On the one hand, local government sells state land at a low price, on the other hand, local government sells state land at a high price. Using provincial panel data from 1999 to 2008, we conducted empirical analysis on nation, eastern region, middle region and western region aspects, and found the facts as follows: First, fiscal decentralization causes the expansion of land-based finance and strengthens the dependence on land-based finance of government. Because different regions have different level of economy, so the effect of fiscal decentralization was different:the eastern region depends on land-based finance more, and the western region depends on transfer payment more. Second, tax reform conducted by government reducing the fiscal revenue of local government, which increases the dependence on land-based finance of local government. Marginal dependence of land-based finance increases as the fiscal revenue decreases. Third, inter-government competition under fiscal decentralization is another important factor causing the land-based finance.In order to break down the land-based finance, we suggest that dividing the responsibility and financial resources between local government and central government rationally, regulating non-budgetary funds, altering the current incentive mechanism, setting up scientific evaluation system for achievements.