How The Local Governments’ Behaviors Impact On The Functional Income Distribution

Income distribution has been a hot topic in current society, which is about the share of achievements in thirty-years’ reform and opening., The government plays a critical role in regulating income distribution gap in secondary income distribution. The impact of local governments’ behaviors on the primary income distribution is not sufficient. This paper attempts to study the local government’s role on functional income distribution (including capital, labor and other factors), which exactly deteriorates or improves the functional income distribution situation.In response to these problems, this paper uses theoretical analysis and case analysis methods. In theory, based on optimization theory to economics perspective, local governments’goals, constraints are summer up, which result in the behavior. Local government behavior reflects the typical characteristics of developmental local government concept:the status imbalances between labor and capital factors. On this basis, the paper analyzes how developmental local government behaviors have an impact on the functional income distribution. In the case study, the author conducted a three-week investigation in L County, A provincial, by interviews with11local officials, collecting first-hand data. The case helps to verify the behavior of local governments’ impacts on the functional income distribution.Based on the above research work the conclusion is made:local governments’ behavior actually worsened the situation of the functional income distribution. Specifically, in the pursuit of maximizing their own financial gains, local govenments enhance the government revenue share in income distribution; out of consideration for their own interests as well as economic development, local government lay particular stress on capital elements income. Thus, local governments and investors "conspire " to promote the upgrading of both governmental and capital income share, squeezing the labor factor income share.The policy recommendations are given:Local governments should transform government functions, from a developmental local government to public service-oriented one; through horizontal and vertical accountability to constrain local government behaviors; promote the marketization process of production factors.The innovation of this paper lies in the perspective of local government. The paper deeply examines the behavior of local governments’ impact on functional income distribution. In addition, the use of optimization theory of economics to analyze the behavior of local governments helps to dig the local governments’ inherent logic chain.