Study Of Institutional Change On Province Directly Governing County Reform

In order to develop county’s economy, overcoming the disadvantage caused by the system of "city directly governing county", the Chinese government put forward government’s administrative system reform of the government at the province level direct governing the government at the county level, referred to as “Province Directly Governing County”. Its essence is the government level reform, which are mainly included administrative decentralization reform and fiscal decentralization reform. The specific forms are included fiscal province governing county, devolving power to county and developing county by expanding power.We attempt to explain the reform of “Province Directly Governing County”. From the macro, medium and micro levels, we combine with Veblen, North, Giref and Masahi ko Aoki ’s definition of institution and their theory of institutional change. We make macro analysis by using idea of institutional change, medium analysis by using the theory of multiple institutional equilibrium and the theory of path dependence, and micro analysis by using mechanism of self feedback. We attempt to analysis deeply the cause, process and result of province directly governing county.Institutional change is in order to obtain potential profit. Even if the potential profit is greater than the cost of reform, it won’t be performed smoothly due to reducing the interests of the interest groups. Whether the institutional change happens is not only depended on the income and cost of the reform, it is also depended on the power of the participants. We can make a conclusion from the game analysis, the municipal government will obstruct the reform due to loss of interests, however, the county government will support the reform due to obtaining the interests. In fact, financial and economic power of county government are controlled by province government, however, the staffing of county government is controlled by city government. So in the process of reform, province government should make sure the reform firstly, then weight gain and loss of all governments, in the end, and establish a supervision and incentive mechanism.Because institutional change will reduce the interests of municipal government, and the game analysis shows county government is face to all kinds of obstacles frommunicipal government in the course of reform. Thus, whether the effect of reform is good or bad? In this paper, the empirical analysis shows that regional GDP, fiscal revenue, fiscal spending, regional population scale, social fixed assets investment, and retail sales of goods are all the common factors that decide whether perform the reform or not. Two type of reforms all have positive effects on the aspect of fiscal effect and economy effect,but the effects are different in period and size.Comprehending the above theoretical analysis and empirical research, we can conclude that province directly governing county reform has achieved certain success, but there are some obstacles in the course of reform. Therefore, we believe there is further room for improvement. Finally, we put forward related suggestions in the end of the article.