Research On The Impact Of Fiscal Decentralization On The Supply Of Public Goods

Fiscal decentralization is regarded as an effective way to solve the problem of insufficient efficiency of public goods supply all over the world,and it is also used as the most important institutional arrangement to realize the "Chinese miracle" because China has enjoyed decades of sustained and rapid economic growth after decentralization of authority.However,a lot of empirical studies based on the China's reform performance have found that the Chinese-style fiscal decentralization reform has fully mobilized the autonomy of local officials in safeguarding the development of the jurisdictional market and that has also stimulated the competition among local governments.This competitive relationship has provided an endless stream of motive power for economic growth and also distorted the fiscal structure of local governments and indirectly lead to the hollowed local finance and the unbalanced supply structure of local public goods.The "Province-Governing-County" is a new round of decentralization under the original structure of fiscal decentralization,which is from the "Municipal County","County Fiscal Control" to the direct management of county governments by provincial governments,it aims to strengthen the county's economic vitality,enhance its fiscal capacity and administrative efficiency.The deeper decentralization has gained freedom from the local government economy.The reform of "Province-Governing-County" and the previous Chinese-style fiscal decentralization generally have prominent policy performance in the county economy.However,it need to be studied empirically whether the fiscal expenditure of local government would be influenced by its new fiscal relations,or the local public goods provision structure would be changed.This paper,based on the Economic Man hypothesis in public choice theory,adopting the method of combining theoretical exploration with empirical research,combining the local government relations under the background of the prisoner dilemma model of game theory,has got the best answer: Competition.Based on the pro-competitive tendencies among governments,local governments are competing around the political promotion of measuring performance benchmark by GDP.The optimal solution has only focused on the supply of economic public goods and neglected the supply of non-economic public goods.That is to say,under the background of Chinese decentralization,the mechanism of "GDP Championships" and the supply of public goods by local governments is as follows: the decentralization leads to the self-interest of local officials,the self-interest tendency of local governments leads to the unbalanced supply structure of local public goods,which leads the decrease of non-economic supply of public goods,and makes the resources to promote the economic public goods of regional economic development Province-Governing-County would decentralize the economic and financial powers of provincial and municipal governments to the county governments,deepen the decentralization,and expanded the discretionary financial resources of local governments.However,the increase of decentralization the supply structure of fiscal public goods in local government has not been verified adequately.Hence,based on the analysis of the mechanism of local government's public goods supply which is analyzed in this paper,it holds the hypothesis that Proposition H1: The non-economic public product's insignificant external effects on county economic growth lead to the inertia of local government supply.Proposition H2: Under the encouragement of performance appraisal and political promotion enacted by the central government,local governments have the initiative and pressure of regional development,that is,they have innate needs for economic public goods.By using the difference-in-differences model,this paper analyzes the relationship between "Province-Governing-County" and local public goods supply.By comparing the differences of education level,medical treatment level and social welfare level between pilot counties and non-pilot counties,it proves that the reform of Province-Governing-County in fiscal decentralization has a adverse effect on the local non-economic public products.It verifies the proposed assumptions.Policy suggestionsThis article summarizes the reasons for the unbalanced supply structure of local public goods as the willingness and the ability of local governments to supply public goods,and it discusses in two aspects.To enhance the ability of local government to provide public goods,it is necessary to:(1)improve the relationship between local governments and government agencies,and make a further division in the functions of governments at all levels according to the characteristics of all levels of government;and empowerment is necessary,and promote the further improvement of the tax-sharing system below the provincial level,and clarify the adjusted administrative and financial rights in the form of laws.(2)improve the transfer payment system.Gaining the weight of general transfer payment and taking the form of "substitute subsidies with rewards";enhancing the supervision and management of special transfer payment.Special transfer payments should have strict usage limit,in accordance with the relevant provisions of the vertical transfer to all levels of government,the government has no right to divert them;raising the standard transfer payment system to the legal level.To enhance the local government's willingness to supply public goods:(1)changing the GDP-based political promotion examination system.Scientific and rational performance evaluation system should not only focus on economic growth,but should also take into account the interests of all parties,such as the satisfaction of residents in the area;replacing the traditional indicators of economic growth from the national wealth increment deducted after the calculation of the "green GDP" and so on.Establishing a performance evaluation system and corresponding incentive system for the supply of comprehensive public goods,clarifying and refining the comparative indicators,incorporating the supply indicators of comprehensive public goods into the assessment system,and provide the economic and non-economic public goods supply Reasonable weight.(2)optimizing local public goods supply decision-making process,and improving the openness and transparency of the public goods supply policy;introducing a hearing system and increasing channels for transmitting opinions;and establishing a decision-making monitoring system.(3)strengthening the local government budget supervision and management.After the change of the financial relations,the central and provincial governments should assume the responsibility of supervising and managing the fiscal budget structure at the county level,discovering the problems in time and issue the rectification requirements so that the county-level finance can form a standardized financial system in a reasonable and orderly manner.In the meantime,we should not relax the management and supervision of extrabudgetary funds and debts of local governments and guard against the drop in the ability to provide public goods as a result of the outbreak of local debt risks.