Fiscal Decentralization And Income Inequality

The problem of income inequality has become a hot topic in today’s society. This gap has found its expression inside cities and towns, inside the country-side, particularly in the difference between cities and villages, and between to the related figures from the country’s statistical bureau, while in 1980 s the Gene coefficient of the Chinese residents was only 0.3, in 2003 it was 0.479 and it reached the highest point of 0.491 in 2008, then in 2014 it was 0.469.The Gene coefficient of the Chinese residents is not only higher than that of the international standards, but also higher than that of the developed countries. Compared with the international, close to 0.5 of the Gina coefficient can be said to be a relatively high level and the Gina coefficient the in main developed countries is generally between 0.24 to 0.36.income gap has become one of the important factors that affect the expansion of consumption and social stability and narrowing the gap between urban and rural residents income gap is still quite serious.Firstly, this paper analyzes the mechanism of the impact of fiscal decentralization on fiscal decentralization and establishes the theoretical foundation for the following. It points out that the fiscal decentralization influences residents income inequality through two channels including direct effect(factor mobility, public expenditure, local government tax policy, local government implementation of public employment policy) and indirect effects(such as economic growth, social stability, the construction of the system, the government’s intervention on the economy and so on).Secondly, the thesis makes a new measure to Chinese-style fiscal decentralization. Combined with the characteristics of china’s financial system and the basis of previous scholars, this paper constructs a measure of the degree of fiscal decentralization of the multi-dimensional combination index system. The results show that the level of fiscal decentralization in China is relatively low, and there are obvious regional differences in the degree of fiscal decentralization and it also makes simple introduction to the development of fiscal decentralization in china. Once again it analyzes the impact of fiscal decentralization on income inequality.Taking Gene coefficient as an alternative variable, the Gene coefficient of urban residents and rural residents in the province is calculated and the overall resident Gene coefficient is calculated. It also introduces the income inequality situation of our country residents in this part. According to the relevant data of 24 provinces in China, the individual fixed effect model is constructed to carry on empirical test on the relationship between fiscal decentralization and income inequality.The studies find that Chinese fiscal decentralization has a important influence on residents income inequality. The fiscal decentralization index parameter value is-0.333726, which means that fiscal decentralization and income inequality presents negative correlation, and it shows that the lower the degree of fiscal decentralization, the lower the residents’ income inequality level. The parameters of the controlled variable regional per capita GDP value is 0.008117, although the value is not high, it stands that economic growth has positive effect on promoting the fair distribution of residents. In the end, based on the theory analysis and empirical test, this paper puts forward the policy suggestions on promoting the fair distribution of our residents income, such as to deepen the Chinese style fiscal decentralization reform and the establishment of powers and expenditure responsibilities to adapt to the financial system, clear division the power of income of central and local fiscal, improve the financial transfer payment system; at the same time, it puts other initiatives to promote the social fair distribution of,such as develop the economy and promote the coordinated development of the region, deal with the relationship between government and market, accelerate the process of integration of urban and rural areas, promote overall living standards of urban and rural residents to improve.