The Analyses On The Impact Of Governments Competition On Local Public Goods Support

Local government competition for the GDP is a common phenomenon in china, thecompetition promote economic growth to a certain extent, but what is the effect ofcompetition on the supply of public goods? The traditional view of Fiscal federalismis that the non-cooperative behavior of competition in local governments can promotethe efficiency of public goods supply, and increase people’s welfare level. At the sametime, some scholars put forward a theory of " race to the bottom ", mainly refers to thebehavior of attracting foreign investment—attract investment by means of tax reductionand other preferential policies, which would come at the expense of the decrease offiscal revenue and the influence on local government’s ability to supply public goods.And we need to systematically study what the competition between local governmentsin China affect the supply of public goods mechanism. The study can provide a certainbasis which will helps to regulate the Local government competition, optimize thestructure of local public goods supply and expand the public goods supply channelsprovide a certain basis, promote the effective supply of public goods in China hasimportant significance.In this paper, we mainly study is the local government competition of GDP, andanalysis the effect of competition on the supply of public service like education, healthcare and social security in china on the basis of predecessors’ theory.In carding on the impact of competition of local government on public goods onthe basis of related literature, give a description of the systematic features of localgovernment competition subject characteristics and characteristics of fiscal expenditurein China and analysis mechanism of local government competition effect on publicservice supply under the current system arrangement, including the achievementsappraisal, promotion game, short term, the influence of budget management and so on.Base on Oates and Schwab (1988) model of fiscal decentralization and MaGuangrong and some assumptions in Yang Enyan (2010), We analyze the effect of localGDP competition for public goods supply which shows that local government behaviorfor the GDP will restrain the public goods supply (such as education, health care andsocial security).This paper chose education, health care and social security level of public servicesupply to be explained variable, the local government competition as the explanatoryvariable, per capita GDP, fiscal decentralization, level of education and population density as control variables, the empirical analysis based on the provincial panel datafrom2000to2012in china, verify the model analysis and the influence mechanism ofthe above analysis. We also found that local government competition on public supplywill have the opposite effect in different level of economic development. It restrain theeast public goods supply, but actually promote the supply of public services in thecentral and western regions.Based on the above analysis, this paper provide the policy advice on how tooptimize of local government competition and improve the public goods supply policyrecommendations from aspects of the official evaluation index system, financial system,etc.