The Economic Analysis Of The Competition Among China Local Governments

The local government is the highest manager in the national administrative region aimed at the economic development within the area under administration. However, the behavior that all the local governments are fighting for the basic developmental elements(resident, population and etc.) constitutes the serious competitive relations among the governments. This kind of competitions among the local governments not only affects the implementation degree of local governments for the central policies, but influences the policy-making and resource allocation within the area under administration. Although the researches related to the local government competitions have sixty-year history, it is not mature for the studies on the competitions of Chinese local governments. Therefore, literature review of theories on competition among local governments at home and abroad as well as research on Chinese local government competition behavior by means of economic tools will be beneficial for the summary of previous research results and the exploration of effective approaches to standardize Chinese local government competition behaviors.The paper firstly made a literature review of local government competition theory of China and abroad to discuss the difference between Chinese and western study on local government competition as well as their development. Secondly, by the application of Agent-client Relationship, the paper analyzed the internal behavior targets of Chinese local governments and had further discussion on the relations among the central government, local government and residents of the area under administration. Meanwhile, tools of Game Theory were utilized to conduct economic analysis on Chinese local government competition from vertical and horizontal angles so as to discuss different behavior features between plundering type and supportive type local government and their competition result. Finally, based on the model results, the paper proposed some suggestions for the regulations of Chinese local government competition in order to maximize the positive effectiveness of local governments and lead local government competitions to promote effectively the economic development, thus to enhance the national development.The innovations of the present paper include: firstly, apply innovatively the Agent-client Relationship to analyze the interest relationship among Chinese central government, local government and residents within the area under administration, analyze three behavior targets of Chinese local government, eliminate the assumption of regarding the benefit maximization of the area under administration as the sole target of local government competitions, build the behavior target model that is more in accordance with the Chinese local governments; Secondly, the Game Model of Chinese local government competitions is constructed to respectively discuss the behavior selections and competition results of Chinese local governments in the vertical and horizontal competitions. There are still many deficiencies in this paper. For instance, the local government competition is related to various subjects such as economics, management and sociology, but in the present paper is only analyzed from the perspective of economics.