Herding Research Of Local Government Decision Under "Government Corporatism" Background

In China, local governments are important parts of the administrative system, which play important roles in social and economic development. In the early years of China’s reform and opening-up, local governments have made important contributions to regional economic development and growth of China’s GDP. However, under the socialist market economy, some local governments have the tendency to act like companies in the administrative process, with the goal of pursuiting profit maximization. Local governments operate like companies, who care only about immediate benefit, regardless of the long-term interest and national interest. Under the background of local governments corporatization, all the work of local governments aim to increase revenue.Conventional economics assumes that human beings are perfectly rational, but this assumption does not work well. People can only be limited rationality with the limit of personal knowledge and other factors. To criticize shortcomings of traditional economics, behavioral economics was launched. Herding behavior is an important part of behavioral economics. By reference theoretical research results of herding, this paper analyzes the behavior of the local government in decision-making performance using the theory of "government corporatization". With the influence of "government corporatization" and limited rationality, local governments result herding in the decision-making process, which affects the quality of the government decisions. Therefore, in the background of "government corporation", the study of herding behavior of local governments is not only conducive to the discovery and analysis of local government misconduct in the decision-making process, but also more conducive to find the root of the problem, to solve the problem.Firstly, this paper makes a review on the "government corporatization" and herding. Herding is firstly studied in biology which makes a description the herding behavior, then gradually refered and studied by other disciplines such as sociology, economics, etc. In China, studies of herding mainly focus on the financial sector, to analyze the behavior of the stock market and other investors. At home and abroad, with the rapid development of China’s reform and opening-up of the regional economy, a number of studies on local development come out, many scholars have proposed the concept of "government corporatization". Scholars have found that some local governments operate like corporations, maximizing profits, regardless of the public interest.On the basis of former research, this paper summarizes the concept of the relevant terms. To discuss more clearly, this paper makes concept definitions of "government corporatization" and herding. Understanding herding theory, we analysis of the basic characteristics of herding. search for herding in local government behacior, then study cases of herding in local government decision-making process to make a qualitative analysis. It also carries out a detailed analysis of the behavior of local governments in environmental pollution control by introducing Pigs model and the Prisoner’s Dilemma, to understand the inner mechanism of local government’s herding. Again, this paper analyzes adverse effects of local government decision-making herding, identify the causes of herding, and propose amendments to the local government herding behavior. Finally, we give a brief review.