Research On Ratchet Effect Of Fiscal Budget

In general, there is informational asymmetry between the principal and agent. In order to restrain the opportunism behavior caused by information asymmetry, the principal observes the ability and effort of the agent through the past performance of the agent, and regards the present performance as the important reference for evaluation criteria in the future. The reference makes the principal move towards the maximum utility, and the standards are always elevated from the precious date, which lead to the ratchet effect. In the fiscal budget of our country, the fiscal budget is always increasing every year. Government, as the taxpayer's agent to manage state affairs, is also a principal. Governments of all levels are entrusted by the superior. There exists the relationship of principal-agent between the government and its superior.Based on asymmetric information, this paper studies fiscal budget, introducing the ratchet effect and testing if there exists ratchet effect in fiscal budget of Xinjiang, and anal sizing the factors of ratchet effect. This paper studies the samples of fiscal budget in Xinjiang from 1999 to 2007. It involves three issues: first, is there ratchet effect in fiscal revenue budget. If there is, is it positive ratchet effect or negative? Second, is there ratchet effect in fiscal expenditure budget? If there is, is it positive ratchet effect or negative? Third, analyze the factors of ratchet effect from the perspective of fiscal revenue and expenditure.The paper tests the existence of ratchet effect of fiscal budget using Excel and Spss13.0, and analyzing the relation between variables by multiple linear regressions. In the last, it analyses the factors of ratchet effect of fiscal budget. The conclusions are as follows.There exists ratchet effect in the fiscal revenue budget; The positive ratchet effect is bigger than negative ratchet effect; There exists ratchet effect in the fiscal expenditure budget; The positive ratchet effect is smaller than the negative ratchet effect; The factors of ratchet effect in fiscal revenue of Xinjiang include the level of transfer payments, budgeting slack, and the changes of environment which affect ratchet effect significantly. The results are consistent with the situation of"passive budget"in fiscal budget of Xinjiang. The level of transfer payments, budgeting slack, and the changes of environment, significantly affect ratchet effect of fiscal expenditure budget in Xinjiang.