China's Fiscal Decentralization And The Farmers' Income Growth

"Three agricultural problems" is a basic problem in the new stage of socialist construction in China, good solving and dealing with the "Three agricultural problems" is a important issue which the party and the country faced. Effectively improveing the farmers’ income is the key to solve "Three agricultural problems".After the Reform and Opening up,China has implemented a series of reform measures which is presented by household contract responsibility system,and these reform measures all have a crucial impact to the increase of farmers’ income. However,the research on the relationship between financial decentralization and farmers’ income growth is rare.So this paper deeply explore the mechanism of financial decentralization influencing the farmers’ income growth based on the perspective of fiscal decentralization system reform,that is,fiscal decentralization affects the growth of farmers’ income mainly by institutional change and combined with the supply of public goods in rural areas.And on this basis, the paper focuses on the relationship between fiscal decentralization and farmers’ income growth since the tax system reform in1994.It starts with a review of the research on financial decentralization and farmers’ income, then it gives an outline about the course of federal decentralization in China and the historical evolution of farmers’ income. The main body of this dissertation is analyzing the the mechanism of financial decentralization influencing the farmers" income and testing the relationship between the two empirically. In the empirical analysis,the paper adopts rural per capita net income of the provinces from1995to2008as the dependent variable and the most common indicators is used to measure the level of fiscal decentralization.In this model, degree of fiscal decentralization,degree of rural per capita net income lagged one, the proportion of population engaged in agriculture, Agricultural output per capita, comprehensive situation of rural public goods supply etc. are also considered.Because the relationship between federal decentralization and farmers’ income growth may vary between different regions,there is further research by dividing the29regions to eastern areas, central areas and western areas.On the basis of qualitative analysis and quantitative analysis,this dissertation draws the following conclusions:financial decentralization has promoted farmers’income growth in an overall manner,and this positive effect is evidently different among different regions.When the medi-variation "rural public goods" is introduced,we find that rural public goods supply weakens the positive effects of fiscal decentralization on farmers’income. Therefore, we discusse the reasons and put forward some policy suggestions which optimize fiscal decentralization promote rural public goods supply to increase farmers’ income.