Research On The Relationship Between Financial Decentralization And Economic Growth Based On Panel Quantile Regression

In recent years,with the development of the world economy,research on the relationship between fiscal decentralization and economic growth has increasingly attracted the attention of governments worldwide.Experts and scholars in various countries are constantly studying the relationship between the two.Some experts and scholars believe that the government has more information about its own residents which leading to better understanding of their preferences.Therefore,they can optimize the supply of public goods and raise government administrative efficiency by delegating rights.Improve the rational allocation of resources so as to promote economic growth.While others believe that fiscal decentralization will lead to corruption,excessive investment,redundant construction,and local protectionism,thus curbing economic growth.Meanwhile,some scholars who work on theoretical study of fiscal decentralization have come to the conclusion that the effect of fiscal decentralization on economic growth depend on the different stages of economy.This paper believes that in different economic growth stages,fiscal decentralization has different effects on economic growth,and this impact should be analyzed at the city level,not just at the provincial level.The ordinary least squares regression method can not describe such differentiation effect,and it needs to be characterized by panel quantile regression.First part of the article introduces the theory and model of the quantile regression method for various panels with fixed effects followed by comparison of the merits and demerits with application of various methods.And for the model search quantile regression estimation,in order to prevent the probe from falling into an endless loop,an improved model search quantile regression estimation is proposed by adding the validity test of the model movement.Then using the Monte Carlo simulation,the advantages and disadvantages of the quantile regression methods for different panels are compared,and the conclusion that the improved model search quantile regression estimation is optimal is obtained.Secondly,using the city data from 2006 to 2015,the improved model search quantile regression method is applied to the study of the relationship between fiscal decentralization and urban economic growth.The cities in the eastern,central and western regions are analyzed separately.We discuss if there is different effect of fiscal decentralization on urban economic growth under different levels of economic growth.We also discuss in which regions and under which economic growth rates the effect of fiscal decentralization policies are better.The empirical results show that,first,fiscal decentralization can significantly promote the economic growth of the city under the current GDP level of each city in China.In economically developed regions,fiscal decentralization has a greater role in promoting economic growth.Second,from a regional point of view,the fiscal decentralization in the eastern region has the greatest effect on the promotion of urban economic growth,followed by the central region and the western region.Moreover,in each region,the coefficient value tends to go up with the increasing number of quantiles,which further validates that fiscal decentralization has a greater role in promoting economic growth in economically developed regions than less developed regions.Finally,based on empirical results,relevant policy recommendations are proposed.