The Influence Of Fiscal Pressure On Industrial Structure

The reform of the tax-sharing system in 1994 and the subsequent reform of the financial system have made the financial power move up continuously.However,the unclear definition of the routine power and expenditure responsibility made the local government undertake more and more expenditure responsibilities.In this context,the fiscal pressure on local governments in our country is gradually increasing.Consider that the expenditure responsibility can't be transferred,in order to fulfill the performance requirements of economic growth,local governments' officials not only have to ensure the steady growth of tax revenues,but also have to seek sources of extra-budgetary revenue.In the same period,the industrial structure of our country has undergone tremendous changes.On one hand,the real estate industry has witnessed rapid development with the scale of investment increasing year by year.On the other hand,the proportion of manufacturing in the national economy is showing a downward trend.Many scholars have paid attention to this phenomenon and do some research on this,but most of them just study from the perspective of fiscal decentralization.In our opinion,changes in industrial structure are likely to be closely linked with government actions under fiscal pressure.Fiscal pressure will be transformed into a pressure-type fiscal incentive that will affect the local government's behavior,thus affecting the local industrial structure.In this regard,this article attempts to study what effect will fiscal pressure have on the industrial structure and why.We put forward two opposite hypotheses:First,under the fiscal pressure,local governments tend to promote the development of relevant industries which related to local tax,like the real estate?service industry?construction industry.In addition,local governments may also promote the development of the land finance,such as real estate and construction,in their pursuit of high extrabudgetary land revenues.This tendency may increase the proportion of the tertiary industry in the national economy.Second,under the fiscal pressure,local governments will engage in "Tiebout competition" which will benefit the development of local industries and their related industries,including expenditure competition which will add productive investment and tax competition that will reduce the actual tax rate.Because the development of manufacturing industry will expand the value-added tax base,and the"spillover benefit" of manufacturing industry will drive the development of commercial and service industries and increase the sales tax base indirectly,thus,under the fiscal pressure,local governments also have the incentives to expand the secondary industry in the national economy.In order to verify the above hypothesis,in this paper,we use panel data from 1997 to 2015 to carry on the regression analysis.We use both the nominal fiscal gap and the real fiscal gap to measure the fiscal pressure.Controlling multiple effects,we examine the impact of fiscal pressure on industrial structure.The final measurement results show that the greater the fiscal pressure on the local governments,the greater the ratio of the added value of the tertiary industry and the secondary industry in the region will be,resulting in the formation of an industrial structure more inclined to the tertiary industry.It is noteworthy that while the tertiary industry has taken up a bigger share of the national economy,the internal structure of the tertiary industry has not been rationalized and the phenomenon of "over-real estate" has emerged.The rapid development of the tertiary industry mainly depends on real estate industry.The above results also passed the robustness test as well as the endogenous test.At present,China is currently in the process of transforming its mode of development,optimizing its economic structure and shifting the motivation for growth.Under the fiscal pressure,local governments' behavior of using land to raising revenues and relying on the real estate industry will result in a single industrial investment structure.The structure is biased toward the real estate industry.In order to reverse this situation and optimize the industrial structure,we think we should first effectively reduce the fiscal pressure on local governments,rationally allocate financial power,continue to reform the routine power and expenditure responsibilities,and improve the system of transfer payments.Secondly,regulate intergovernmental competition and improve officials' assessment system.Third,optimize the industrial structure of to prevent the land finance "hemiplegia".