Institutional Change And The Central And Local Game

Institutional change is the course in which institution transforms the disequilibrium into the equilibrium. The core of central and local governments relations is the problem of equilibrium of interest. The central governments stands for national interest and the local government stands for local interest. The transition from the planned economy to the market economy is a certain kind of institutional change. It is essentially a re-adjustment of interest relations. In establishing market economy, conflict of interests caused by the institutional change usually leads to changes of central and local governments relations.Institution is the basic regulations. When various economic individuals play games, they must obey the regulations. On the contrary, institution come into being by games. Games between central and local governments, can establish equilibrium of institution, which also can impel institutional change to move towards the path dependence.This article attempts to break through restrictions of the traditional theoretical model, and firstly focused on the analysis of the process of institutional change, and study the effects of institutional change on central and local government relations.This article can be divided into 4 parts.Parts One: Discussed the connotation and function of institution, equilibrium of institution and institutional change, the type of Chinese economic system change.Parts Two: Reviews the historical development of relations between central and local governments, analyzes that the power and independent economic interests of local governments has been strengthening, which provides the possibility of games between central and local governments .Parts Three: Expounds the cause of games between central and local governments during the Chinese economic system change, and analyzes used model the new disequilibrium between central and local governments, for example, localism and protectionism, financial weakness of central government, etc.Parts Four: Makes some suggestions and counter measures to adjust the relations between central and local governments to equilibrium, and to establish institution of equilibuium.