Yunnan Local Government Fiscal Expenditure Structure Of Empirical Research

This paper firstly comment on the significance of the optimization of fiscal expenditure structure, and discusses the history of the evolution of financial system reform in China, and then analyses the reform of public finance system. This paper analyses the factors that influences the fiscal expenditure structure, based on the data of Yunnan province, and then inspects the output elasticity and the contribution of human capital in the economic growth in Yunnan province. The empirical results show that the human capital plays enormous role in economic growth. Then we use the data of sixteen districts of Yunnan to inspect the reasons that the deviations of different government's expenditure structure various districts in Yunnan province, and then test the results empirically using the panel dates from 1994 to 2008 analyzed. Our main conclusion is:in Yunnan province, fiscal decentralization causes no distortion of local government's expenditure structure,competitions among local government not only increase the proportion of basic construction spending but also the proportion of the science-education-culture-health expenditure,where the local competition for the input in basic construction is above of the enthusiasm in the science-education-culture-health. When the competition increases 1 percentage, the input in basic construction investment will increase 2.58 percentage and it in science-education-culture-health will increase 0.35 percentage. That is to say, the proportion increased of basic construction is more than seven times of the science-education-culture-health. This shows that based on the explanation of the examinational under local government competition, in recognition of basic construction expenditure on the human capital investment and public service. Low level of economy is also a significant factor on government expenditure structure. The process of economic transformation in Yunnan for expenditure structure system changes also have an important impact.Between human capital and physical capital, human capital has the larger contribution to economic growth, this shows that the greater human capital investment can promote the economic growth and development faster, but Yunnan Province in favor of physical capital expenditure and neglected in human capital investment. Local competition, economic conditions, institutional change are the important factors which caused the expenditure structure to bias,Therefore, in order to change the structure of expenditures and serve the society better, provide the society with a higher level of public services, we must change the government's assessment mechanism and invest the human capital heavily. The more investment in human capital, the faster economic development. Thus we can provide more and better service to the society.