Research On Capitalization Of Public Services And Fiscal Incentives Effects

With the development of Chinese economic reforms, the development pace of land market and real estate market is accelerating. Meanwhile, local governments revenue system related to land market and real estate market is formed gradually. Currently, land transfer fees and real estate transaction taxes become important tools to Chinese local governments revenue. However, it is worth exploring whether this revenue system of local governments provides fiscal incentives to the supply of public services and encourages local governments to provide balanced public services or not. To solve these problems, firstly, the thesis introduces the research on capitalization effects of public services, and combines public services capitalization and nature development process of land market and real estate market. The study aims to find that whether capitalization occurs to the phase of land transfer or the phase of real estate transactions. The thesis selects four kinds of public services:education, culture, health care and transportation. In addition, the author defines land price and real estate price as proxy variables of land transfer and real estate transactions respectively, and selects35cities balanced panel data from2001to2011as sample data and establishes hedonic functions. Empirical results show that:education, culture and transportation can capitalize into real estate price, only transportation can capitalize into land price. That is to say, most public services could not capitalize into the phase of land transfer, but capitalization creates conditions to fiscal incentives.Secondly, the author combines temporal characteristics of capitalization and local governments revenue structure. Capitalization brings assets premium, revenue tools provides methods to capture assets premium, thereby forming a special local government revenue structure. In order to explore the relationship between specific revenue tools and fiscal incentives, the thesis selects35cities balanced panel data from2007to2011as sample data, chooses three kinds of public services which have capitalization effects:education, culture and transportation, and defines real estate price and land price as proxy variables. Empirical results show that:when local governments obtain revenue through real estate taxes, the increase of real estate price provides fiscal incentives to the supply of education, culture and transportation, when local governments obtain revenue through land transfer fees, the increase of land price provides fiscal incentives to transportation provision.Finally, in the condition that the contemporary Chinese local governments depend on land transfer fees, empirical results help us to understand local fiscal expenditure composition bias. The thesis makes policy recommendations to promote tax in maintain links as soon as possible, reform and improve local governments revenue system. The author hopes to gradually change the phenomenon that local governments rely on land transfer fees and improve local fiscal expenditure composition.