Local Government’s Self-interest And The Efficiency Of Social Security Expenditure

Livelihoods problems have somehow hindered the Chinese continuous development. Social security is one of the most important livelihood issues, which is also a top priority of the government work. Social security is a system which provides help to the residence of one country when they are faced with plight because of aging, unemployment, serious diseases and other problems. Social security is one of the important ways for the government to realize its function. With the accumulation of national wealth, Chinese government is financially stronger to yield more into social security. Social security is a local public good, local government plays the most important role in providing it. Social security is a system constructed by every concerned government bureaus, through which expenditure on social security is transformed into social security public good. So social security expenditure efficiency is a reflection of the operation of social security system.Zero chapter is a search of foreign and home literature about social security expenditure efficiency and government’s self-interests. In the first chapter, I give the definition of the local government’s self-interests and social security expenditure efficiency. The local government is the provider of the local social security and has its own interests which are not exactly consistent with local welfare, and this fact suggests that during the implementation of the social security policy the government might purchase their own interests on the sacrifice of local welfare. The over expanding of the government, the government’s preference of public goods, and the treatment gap between the government employees and other residence are unfavorable conditions for the realization of the social security expenditure efficiency. In the second chapter, this thesis explored the internal mechanism of through which the self-interest of local government restricted the social security expenditure efficiency. The over-expanding administration will lower the social security efficiency because of two reasons. First, because of the lack of competition, X-inefficiency always exists in government bureaus, the expanding of administration has no doubt made the situation worse. The over-sized government is also a good cover for bureaucracy and rent seeking. The lack of preference also leads to the absence of the government in social security supply. The treatment gap between government employee and other residence shows an unbalanced cost- interest distribution. The government provides the social security product at a much higher price so it can pass on the cost of the government employee to other local residence. The third chapter is an empirical study. I first used DEA (Data envelopment Analysis) to calculate the social security expenditure efficiency of27regions of China between2007-2009. The result is different from the previous studies. Next, using Tobit model, I analyzed the influence of government’ self-interest upon social security expenditure efficiency. The result shows that, under current condition, the size of the government is favorable for the realization of the social security expenditure efficiency, and the change of the government’s preference is the most effective way to improve the social security expenditure. The last part is a conclusion of the thesis content which also points out the weak points of the article.