Research On Influences Of The Fiscal Decentralizatio System To The Supply Of County-Level Public Goods

The decentralization reform has been an important issue of economic and political fields since China’s economic reform began30years ago. Fiscal decentralization has been deemed as one of the critical reasons of China’s rapid economic growth, and it also provides favorable experience for reference in the reform of administrative system and political system. Academia have reached consensus that, China’s fiscal decentralization reform has promoted competition among governments at different levels, and it has stimulated local governments’ economic growth. In addition, it improves the ability of local governments’supply of public goods. With the China’s ’tax-sharing system’reform between central government and provincial governments in1994, governments at and below provincial level follow the way of fiscal decentralization. Thus, they established the basic financial system which includes the division of public expenditure responsibilities and tax rights between local governments, and cooperation in the provision of public product. Specially,’Province Governs County’ fiscal system is considered to be more advantage of a kind of decentralized financial system at and below provincial level. This paper, taking this as the background, researches on supple problems of county-level public goods in’province governs county’ fiscal system of Zhejiang Province. At present, county-level public good supply in Zhejiang is inefficient and the structure is unreasonable. Especially, infrastructure construction and administrative expenses occupies the expenditures on education, health and other public services. This paper, uses current supply of county-level public goods as the empirical basis. In the same time, it takes fiscal decentralization theory as the theoretical basis, and with the development of’Province Governs County’ fiscal system of Zhejiang Province and the right expansion reform of county-level governments. From all these, it concludes that the reason why supply of county-level public goods is low efficient lies in the defective and imperfection of current "province governs county" fiscal decentralization system. The existing system defect, namely public expenditure responsibility division between local governments is rather vague, the division of powers does not match the right of revenue among governments at and below the provincial level. Furthermore, there lacks of the mechanism of public preferences display, and local governments lack the incentive of the effective and rational supply of public goods.This article takes the influences of the "province governs county" fiscal system to the supply of county-level public goods as research foundation. Then I find that fiscal decentralization leads to competition between local governments, and in this way it affects the supply of public goods. I analyze10years panel data about the supply of county-level public goods in Zhejiang, use the OLS analysis in econometrics as the main method, and discuss the relation between the degree of ’province governs county’ fiscal decentralization and supply of county-level public goods. The analysis shows that, firstly, the degree of’province governs county’fiscal decentralization is positively correlated with supply of public goods. That means with the increasing degree of decentralization where the supply of public goods is increased. Secondly, as the public good is different, the rate of positive effect is also different, which administrative fee has the most positive effects, followed by education, and road density has the least positive effects. Thirdly, the better the level of economic development, the stronger the positive effect which’province governs county’fiscal decentralization on supply of public goods.Based on above research, this article finally puts forward the basic idea of effective supply of the county-level public goods in the’province governs county’ fiscal decentralization system, includes the improvement of the’province governs county’fiscal decentralization system, and rationalization of the inter-governmental fiscal relations, the promotion of the reform of rights expansion of the county-level governments and improvement of supervision mechanism of the local government, the optimization of the structure of public expense and transformation of government functions, the reform of performance evaluation mechanism and regulation of the local government’s behavior pattern.