A Panel Analysis Of The Effect Of China's Fiscal Decentralization On Economic Growth

With the reform and opening policy,China's economy has a great and rapid development,fiscal decentralization reform has played a very important role in the economic system reform and development of our country.Nowadays,China's economy has entered a new normal state,facing a series of problems,such as the economic growth slowing down,the urgent need of transformation in economic restructuring.In this new economic climate,China's smooth development is inseparable form government's intervention.Fiscal decentralization is an important aspect of the government's macro-economic management.It is of great significance to study the influence of fiscal decentralization on economic growth rate,efficiency and structure,doing benefit to help government playing a leading role in China's economic development.Based on the theories of fiscal decentralization and economic growth,the paper firstly discuss the effect between fiscal decentralization and economic growth from two perspectives: economic efficiency and institutional environment,and finds that local governments have the information advantage which can improve the public goods provision efficiency and that reasonable al ocation of property rights and powers between federal and local governments can create a better micro economic environment,thus optimizing the economic structure and promoting economic growth.Then,according to the conclusion of the theoretical analysis,this paper empirically tests the effect of fiscal decentralization on economic growth,economic efficiency and economic structure by using the provincial panel data of 1996-2014.The result is as follows.There is a mismatch between the decentralization of fiscal expenditure and revenue in China,the increase in the degree of decentralization of fiscal expenditure will inhibit the economic growth rate and economic structure optimization,the increase in the decentralization of fiscal revenue will promote the increase of economic growth rate and the improvement of economic structure.The increase in decentralization of fiscal expenditure will promote the improvement of local economic efficiency,and the fiscal decentralization and economic efficiency are negatively correlated.According to the conclusions above,this paper suggests that central government should appropriately expand the degree of revenue decentralization,reduce the pressure of local government financial expenditure,strengthen the local financial autonomy,and implement the real tax sharing system.