A Study On The Impact Of Local Government Competition On Regional Economic Growth Under The Background Of Fiscal Decentralization

After the reform of fiscal decentralization, central power gradually transferred, in alleviating the central great financial pressure, at the same time, giving local government dominated financial income and investment decision-making power, local governments become the jurisdiction area of public owned economy real residual claimants and control persons. Economic decentralization and accompanied by political centralization, local officials of political promotion is still by the central government to assessment, and regional economic growth linked, coupled with constraints on the total amount of social resources, between the local governments will inevitably produce intense competition, in order to compete for more conducive to economic growth in the region of elements. The so-called local government competition actually refers to the strategy interaction between local government, and a local government behavior can not only affect the local economic growth, but also have an impact on the other regions. China’s fiscal reform as the starting and the main content of the development of decentralization, laid the basic pattern of competition among local governments. The purpose of local government competition is to attract more production factors, and through the rational allocation of resources to get more benefits, so as to improve the living standards of local residents. Local government has the right to economic decision-making power and remaining claim after the implementation of decentralization reform, but as a result of social overall resources are always limited, so different local governments have to start a fierce competition, in order to compete for more appropriate effective resources for the development of the local area. So what are the mechanisms of these strategic interactions between the local governments on economic growth? Are these competition is bound to bring positive effects to regional economy? This article is based on this approach to study the impact of competition on regional economic growth between local governments.The main purpose is to investigate the effect of local government competition on the economic growth in the context of fiscal decentralization, first of all,from the two aspects of the theory of fiscal decentralization, the oligarch competition model to explore local government competition on the theoretical basis of regional economic growth and then clarify the local government competitive mechanism of impact on economic growth, including the analysis of Fiscal Decentralization under the background of the formation of local government competition, and competition of local governments on economic growth mechanism. Secondly, the historical evolution process, characteristics and current situation of local government competition in China is analyzed. Thirdly, based on the theoretical analysis, and with the data of 30 provinces in our country 2006-2012 years as the sample, this paper build a panel date model, selected tax competition, fiscal expenditure competition data to measure local government competition strategy, and regional economic growth rate to measure competition results, and use spatial econometrics to empirically test the competition and growth between the two relations. The empirical results show that the level of macro tax burden is significantly related to economic growth, while tax competition can promote economic growth. In addition, the impact of local government expenditure competition on economic growth is not significant, the degree of local fiscal decentralization is obviously conducive to economic growth.Finally, the paper argues that the relationship between the local government competition and economic growth is to standardize behavior of competition among local governments, to promote economic long-term growth. Therefore, the author according to the empirical results are presented for pieces of policy suggestions:such as further rational use of tax competition among local governments, to attract more capital, labor and technology factors such as inflow. The local government expenditure structure should be reasonable, to avoid structural bias, increase the fiscal expenditure in science, education, culture and hygiene fields. To reform the existing performance appraisal mechanism in a certain extent, no longer to GDP heroes, but the livelihood, ecological, social progress etc. into the comprehensive evaluation system.