The Study Of Incentive Mechanism Of Local Government’s Governance Transition

Putting forward the objects of constructing State Governance System and accomplishing the modernization of Governance Capacity, which means Governance becomes the core proposition of Chinese Government. Governance Transition takes root in the Governance Theory originating from the West, which appears as State Governance in Chinese context and emphasizes the connotation of governing a state. Both Chinese and Western Governance Theory have the intention of transition. Chinese Local Governance Transition represents the micro process from traditional control government to public service government in terms of role, function and tool. The participants of Governance Transition present pluralism, the Central Government is responsible for depicting macroscopic picture of Governance Transition, Local Government plays the crucial role in enforcing the Central Government’s ideas and realizing Governance Transition, the former and the latter form one kind of Principal-Agent relation. Governance Transition offers Local Government a series of objective demands from Governance idea, Governance objective, Governance participant, Governance system, Governance function, Governance regulation, Governance method, but North Paradox shows that Local Government is likely to become obstacle factor for Governance Transition, as a result there is a need to concentrate on the Incentive Mechanism between Central Government and Local Government under the Principal-Agent Model. Local Government’s present Incentive Mechanism includes administrative allocation, administrative decentralization, financial decentralization and officer promotion tournament. On account of fuzziness of expression of Governance idea, the highlight of multiple targets and information asymmetry under the Principal-Agent Model, the logic of acquiring benefits of present Incentive Mechanism, Local Government has formed the inertia of relying on the economic performance, outside participants have limited effects on the incentive of Local Government, Local Government hardly takes initiative to pursue Governance Transition, which requires the optimization of Incentive Mechanism of Local Government. Learning from Holmstrom and Milgrom’s multiple objectives of Principal-Agent Model and the conclusion of Authorization Model, the extent of the decentralization between Central Government and Local Government, the completion of Principal-Agent Model, the quantity of Incentive patterns influences the Incentive mechanism of Local Government, hence reshaping the Incentive Mechanism of Local Government by means of deepening administrative and financial decentralization, consummating the Principal-Agent Model, adding the variety of Incentive patterns, to urge Local Government to pursue Governance Transition.