Analysis Of The Influence Transfer Payment Has On China’s Regional Economic Convergence

The research on convergence developed rapidly during the last decade in the20th century. The research focuses on the existence of convergence and revealing the internal mechanism of regional convergence from different perspectives. It arouses widespread concerns because of the ever-increasing inter-region gap and the concern of various scholars on the balance or fairness issues between regions. Since there is significant difference of economic strength between the southeast coastal area and the poor regions of the middle and the west, it is of great importance to research on regional economic convergence in china. The tax-sharing system reform was established in1994in china, including the establishment of inter-government transfer payment system. Then China’s government officially proposed to reduce regional economic disparities, but the regional economic gap is still widening. The regional economic development imbalance will inevitably bring negative effect to China’s long-term economic growth, undermining the smooth operation of economy. Operating as one of the most important means for the government to regulate regional disparities, what impact did transfer payment have on regional economy since the tax-sharing system reform? Whether it helps to narrow the gap between regions? These issues are worth researching.Many scholars research on the influence of various factors on China’s regional economic convergence, but only a few of them researched from the perspective of transfer payment. Focusing on the relationship between transfer payment and regional economic convergence, this paper starts from the perspective of transfer payment. Firstly, defining important concept of economic convergence and transfer payment, conducting in-depth analysis on the mechanism of how transfer payment promotes regional economic development; Secondly, making descriptive statistical analysis on current situation of regional economic development difference and transfer payment, analyzing equalization effect of transfer payment at the same time; subsequent empirical analysis using the data of the whole country to conduct conditional β convergence, which is based on the neoclassical growth model. It proves that transfer payments in China failed to boost the effect of regional economic convergence since the reform of sharing-tax system. Lastly, put forward corresponding suggestions to improve current transfer payment system.