Land Fiscal And Local Public Goods Provision

Decentralized federalism theory suggests that fiscal decentralization can effectively promote the economic growth. However, according to the researches on empirical evidences from China, Russia and other countries, fiscal decentralization does not necessarily bring rapid economic development. In this case, many scholars proposed "Market-preserving Federalism with Chinese Characteristics", pointing out that the combination of fiscal decentralization and political centralization is the main reason for China’s rapid economic development.In1994, China adopted tax-sharing reform. fiscal decentralization reform entered a new stage, while the central government has been in control of personnel appointment and removal of local government officials. Against the background of vertical fiscal decentralization, local governments got into a financial predicament. However, the highly centralized political landscape makes a fierce competition among local governments. Revenue is an important foundation of local governments’ competition. Searching for new sources of finance, the urban land gradually becomes the focus of the local governments, and the land reserve system becomes an important tool for local governments to acquire land fiscal.Under the governance model of "Tournament Competition of Political Careers", the central government takes GDP as the main criterion for local government officials’ performance. The provision of public goods has a very significant impact on the local economy, and local governments’ competition ultimately reflected in the provision structure of public goods. The supply of local economic public goods can effectively attract foreign investments and stimulate local economic growth. In order to obtain the economic performances, local governments provide lots of revenue to the local economic public goods, ignoring the supply of non-economic public goods.The impact of land fiscal on the provision of local public goods is the most important chain between fiscal decentralization and economic growth. Clarifying the influence mechanism between them helps us a better understanding of the relationship between fiscal decentralization and economic growth. Therefore, the main content of this paper is to analyze the impact of land fiscal on the provision of local public goods.Taking Hangzhou as the typical case, the article analyzed the process and the formation mechanism of land fiscal, providing the hypotheses to be tested for further analysis simultaneously. Using the2003-2011National experience within the range of286prefecture-level and above cities, the article tested the proposed hypotheses.The empirical results showing that, urban land reserve system in Hangzhou pushed the price of land higher, and the size of local land revenue also expanded. Urban land reserve system has become an effective tool for local governments to regulate urban land markets and access to land revenue. In the supply of public goods, along with the increase in land revenue, the local infrastructure has been greatly improved, as well as the non-economic public goods. However, the national experience shows that the land fiscal has a different effect on the supply of local economic and non-economic public goods. There is no significant relationship between the growth of local non-economic public goods and the land fiscal. What’s more, we probed the reason why the different local governments have a diverse provision structure of public goods.