The Influence Of Local Fiscal Expenditure Competition For Local Economic And Social

The fiscal competition between local governments is a hot issue in domestic andinternational academic research recent years. In western countries, local governmentshave relatively independent fiscal permissions and expenditure responsibilities.Through tax incentives to reduce marginal tax rates of businesses and residents,andinvestment in public goods of the to improve local development environment,localgovernments could attract the inflow of resources such as residents,vendors, andcapital. Tax revenues competition and expenditure competition have become twoimportant policy instruments of local governments to promote the development of theareas they govern.Since the reform and opening up, establishing the public finance system hasbecome the most important issue in the construction of China’s financial system, tobuild the public finance system, rationalize the relationship between the localgovernments is one of the key links, including the vertical competition between theupper and lower levels of government and the horizontal competition between thegovernment at the same level. In the same level of local governments, financialexpenditure competion has been used more than tax competition nowadays. It canavoid the crowding-out effect to the private sector economy and better reflect thefunctions of service-oriented government. More and more local governments havetransferred from tax competition earlier days tilt to the current financial expenditurecompetition.the fiscal expenditure competition between local governments,on onehand,improves local government in providing public products on the efficiency oflocal government, hardening budget constraint, promoting the inflow of foreigncapital, but on the other hand, it also leads to some negative effects. The larger areagap, local protectionism, serious repeated construction,and the distortion of financialexpenditure structure is also shown increasingly. The fiscal expenditure competion will bring both advantages and disadvantages at the same time to the economic andsociety, so its future is unclear. Only by deepening the reform of the financial system,actively guiding and standardizing the fiscal expenditure competition between localgovernments, can realize the regional coordinated development of economy andsociety.But the current research literature is still not meet the needs of practice, the studyof local government expenditure competition is still in its infancy. In this context, thisarticle will focus on financial expenditure competion,which is the hot issue in China’snational economy and social life. on the basis of the existing literature, this article willelaborate the fundamental theory of fiscal competion to clear its concepts,characteristics and causes. Then,this article will analyze the effect to the developmentof local economy and society in several aspects. To avoid unfavorable factors,I willgive some suggestions to standardize and improve the fiscal expenditure competion,inorder to provide some necessary reference to the development of fiscal expenditurecompetion.