The Study Of The Influence Of Fiscal Decentralization On The Growth Of Economy

Economic growth has been included in the macro-control goal in various countries, butit is considered to be the results of increased investment, technological progress and theinfluence of the macro-control. Fiscal decentralization is also an important factor affectingeconomy, which has a complex influence on economic growth. The degree of fiscaldecentralization may be the main factor that determines the results, negative or positiveeffect to the economic growth. In addition, when the economy is in the early levels ofdevelopment, it may need central government to dominate the more part of fiscal resourcesin order to guarantee the supply of national public goods. When the economy is in themature period, increasing local government proportion of fiscal expenditure will improvethe welfare of local people because the local government can provide diverse publicproducts to its people. This paper will explore the impact of fiscal decentralization oneconomic growth, and find out the circumstances under which it will promote or inhibiteconomic growth. I hope my work will give some useful reference to the fiscal systemreform. Basing on the theory of fiscal decentralization and economic growth theory,gaining inspiration from institutional economics, the marginal utility theory, and thedevelopment of economic theory, this paper integrates use of theoretical and empiricalmethods, and combines qualitative and quantitative analysis. Referring to the traditionaland the second generation theory of fiscal decentralization, this paper analyzes the impactof China’s fiscal system reform to its economic growth using statistic data. This paperpoints out that the high and low decentralization dose harm to economic growth and anoptimal degree of decentralization exists in the fiscal system. The optimal degree of fiscaldecentralization is not permanent, and changes with the development of socio-economic,human-cultural and other factors. This article draws on existing research model which usesquadratic term to compute the optimal degree of fiscal decentralization in China, and theresult is62%. And come to the conclusion that proportion of central governmentexpenditure should be increased.