A Study On Local Officials Incentives In The View Of Chinese-Style Decentralization

Decentralization is a global phenomenon in today’s world. Since the reform and opening-up, China’s economic success has great relationship with the institutional arrangements of "economic decentralization and political centralization", what’s more, the role of local officials should not be ignored.This paper firstly discusses the general meaning of decentralization and the particularity and connotation to the Chinese-style decentralization.The root that decentralization can produce incentives has two basis reasons, one is the particularity of power, other is the official who is also a continuum of self-serving and altruistic.Keeping existing jobs and getting promoted in the future expectations are the officials two basic incentives. And two parts of Chinese-style decentralization-economic incentives and political promotion incentives, just fits the officials’two basic incentives. The core connotation of Chinese-style decentralization is closely integrated by economic decentralization and political centralization. So the main structure of this paper is focusing on two fronts to discourse:one is the economic decentralization and economic incentives, other is political centralization and political promotion incentives.Economic decentralization can be divided into the decentralization of economic management rights and financial rights.This paper discusses the evolution of economic management rights and property rights in three periods of the pre-reform period,1978-1993and since1994to today. In this three periods,fiscal decentralization had experienced an excessive decentralization and decentralization corrective process. Overall, China’s fiscal decentralization is successful, for the implementation of fiscal decentralization along with China’s economy sustained rapid growth and the strong fiscal incentive of local government. Because of this, either fiscal contract or Revenue-sharing, local officials who under the incentives of economic have the incentives bias of "attach importance to economic construction and light public service".But Revenue-sharing reform does not solve the extra-budgetary funds.The recent expansion of the local land premium makes the extra-budgetary funds issues more prominent, thus an empirical analysis has made for this.Political promotion incentives is a more fundamental incentives for government officials. Economic incentives is just a means officials and promotion is the ultimate goal. A series of reforms of the Chinese officials appointed and evaluation mechanism make the personal authority up focused. It is "responsible for Superiors" and making GDP as a core assessment standards that laid a good foundation for the implementation of the promotion tournament.With the implementation of promotion incentives, it promotes local officials "competition for growth " in one hand, but it also brings a serious problem of local protectionism, environmental pollution, regional cooperation difficult and vicious competition in the other hand.In the condition of zero-sum game, incentive attenuation and promotion hopeless, local officials are more likely to held out "grabbing hand". Based on this, we constructed a utility function of the local officials, promoted or not, local officials also will adjust their behavior to maximize their utility, which will produce a variety of socio-economic impact.There are lots of inseparable relationship among in China’s economic success,the right road of decentralization and effective incentive for officials.But the Chinese-style decentralization and officials incentives have problems, one challenge from their own’s "competition for bad" which brings growing cost, other from the sustainability of government-led investment-driven economic development model. With the labor supply from unlimited to limited, the officials’ GDP achievements should be turned to rely on total factor productivity and investment in human capital, and change the mode of economic development, which is bound to be reform the current decentralization style and officials incentive model.