Under The Fenshuizhi Reform Of Local Fiscal Expenditure And The Gap Between Urban And Rural Residents

As an important mechanisim to allocate public resources and improve the efficiency of public goods supply, local government fiscal expenditure becomes an important measure of China’s reform of the public sector from the founding of our country,especially from the reform and opening-up. While the Chinese government carried out the tax system reform of financial system in 1994,the economic benefits of local government got certain institutional guarantee. To get more and more economic benefits, the competition of local government becomes the basic of the Chinese economic development. However,this competition results in the policy distortion of the tendency of urbanization in public fiscal resources allocation.This article discusses the internal mechanism of local fiscal expenditure changes, the effect of the resources allocation machanism and institutional environmental machanism in local fiscal expenditure on income gap between urban and rural areas, demonstration examines the effect of local fiscal expenditure, especially for supporting local agriculture,local science-education-culture-health career and public service on income gap between urban and rural areas.First of all, the article summarizes many articles about fiscal decentralization, the central finance,the local fiscal expenditure and the income gap between urban and rural areas, describes the first and the second generation of fiscal decentralization theory and Chinese fiscal decentralization theory, systematic reviewing the reform process of Chinese financial system, analyzes the scale and the structure of the central financial expenditure and the local financial expenditure and current situation of the development of Chinese urban and rural income.Second, the mainstream fiscal decentralization theory is used to analyze the partial behavior of urbanization of local government allocating public resources under the dual incentive of economic interests and political promotion, with a combined action of the resource allocation mechanisms and the institutional environment mechanisms, the distortion of public financial resource allocation becomes an important reason of the income gap between urban areas and rural areas.Finally, establishing the variable intercept fixed effect panel data model to prove the effect to the income gap between urban areas and rural areas caused by the local fiscal expenditure, the local financial expenditure for supporting agriculture, science-education-culture-health career and public service. The results show that under the condition of controlling other variables, the local fiscal expenditure, the local financial expenditure for supporting agriculture, local science-education-culture-health career and public service are the important factors for the income gap between urban areas and rural areas, which has a integration relationship with the income gap between urban areas and rural areas, which is the so-called long-term equilibrium relationship under the condition of controlling other variables. From the national level, the local fiscal expenditure for supporting agriculture can significantly narrow the income gap between urban areas and rural areas, but there is a negative effect between the local fiscal expenditure, the local financial expenditure for supporting science-education-culture-health career and public service and the income gap between urban areas and rural areas, which means expand the income gap between urban areas and rural areas. From the regional level, the effect to the income gap between urban areas and rural areas caused by the local fiscal expenditure, the local financial expenditure for supporting agriculture, science-education-culture-health career and public service is consistent with the effect in the whole country, only there is an obvious difference in the significance of regression coefficient between regions.Chapter of this paper are arranged as following:the first chapter is introduction, putting forward the problems and making a literal review, the second chapter is concept definition and theoretical basis, the third chapter analyses financial reform, the local fiscal expenditure and the present situation of the income gap between urban and rural areas, the fourth chapter is the theoretical analysis about the local fiscal expenditure and the income gap between urban and rural areas under the background of the system of tax distribution, searching the mutual influence mechanism, the fifth chapter is the empirical testing, verifying the mathematical relationship between the local fiscal expenditure and the income gap between urban and rural areas, the sixth chapter studies the conclusions and the policy suggestions.