Research On The Influence Of Chinese Decentralization On Local Government Expenditure Structure Bias

The report of the Nineteenth National Congress of the Communist Party of China clearly states that "promoting people's livelihood and well-being is the fundamental purpose of development.We must seek the interests of the people's livelihood and alleviate the worries of the people's livelihood,make up for the shortcomings of the people's livelihood in development,promote social equity and justice,and constantly make new progress in nurturing children,educating them,gaining from work,treating their illnesses,supporting the elderly,living in their homes and supporting the weak.In fact,as early as in the report of the 17 th National Congress of the Communist Party of China,it was proposed to speed up the social construction focusing on improving people's livelihood.However,after ten years,there are still many shortcomings in the field of people's livelihood in China,and the problem of insufficient development has not been solved.Based on the analysis of the fiscal revenue and expenditure of the central and local governments in recent years,this paper finds that the supply of public goods in the field of people's livelihood is not significant.In reality,the local governments of our country bear most of the expenditure responsibility for public goods and services.However,there has been a structural bias in the local government's fiscal expenditure to emphasize productive expenditure and neglect people's livelihood expenditure for a long time,which makes our country achieve remarkable results in infrastructure construction and other areas,but the people's livelihood has become a short piece.Moreover,the preference of local government's expenditure structure to pay more attention to production and less attention to people's livelihood is incompatible with the current emphasis on the overall development of our country,the shortcomings in the field of people's livelihood and the fundamental purpose of promoting people's livelihood,which makes it of profound practical significance and strategic significance to study the causes of the preference of local government's expenditure structure.In order to explore the root causes of this problem,this paper is different from previous studies based on promotion Championship theory.Based on the hypothesis of "economic politicians" of local government officials,this paper aims to study the influence of the Chinese decentralization system itself on the bias of local government expenditure structure.Through sorting out the process of decentralization reform in China,this paper summarizes the characteristics of Chinese decentralization(political and economic decentralization,vertical decentralization without horizontal decentralization,lack of effective incentive compatibility mechanism),and explores the impact mechanism of Chinese decentralization on local government expenditure structure bias.Under the assumption that local government officials belong to the status of "economic politicians",this study finds that in order to pursue political and economic interests and gain benefits during their limited term of office,local government officials have strong self-interest motivation for the structural bias of emphasizing productive expenditure and neglecting people's livelihood expenditure.At the same time,the higher the fiscal autonomy of local government officials,that is,the higher the degree of Chinese-style decentralization(fiscal decentralization),the more serious the biased expenditure of local government.However,under the Chinese decentralization,there is no perfect vertical and horizontal accountability mechanism to supervise and restrict the self-interest behavior of local government officials,which provides the survival soil for the deviation of the local government's expenditure structure from the central development purpose,and then uses the panel data of 31 provinces and autonomous regions in China from 2007 to 2016 to construct an empirical model to verify it.The main conclusions of this study are as follows:Firstly,under the Chinese decentralization system,due to political centralization and economic decentralization,local governments in China have certain economic autonomy and can decide the structure and scale of local fiscal expenditure independently.In addition,there is no perfect and effective incentive compatibility mechanism to coordinate the interests of the central and local governments in the implementation of relevant policies.Vertical decentralization without horizontal decentralization makes governments at all levels lack effective horizontal supervision and restraint mechanism.At the same time,vertically,the central government,as a principal,lacks effective vertical supervision and accountability mechanism for selective execution and distorted execution of agents' local governments due to information asymmetry and difficulty in quantifying assessment indicators.Therefore,under the Chinese decentralization,it is difficult for the central government to restrain the self-interest of local government officials.Secondly,local government officials under the assumption of "economic politician" status have strong incentives to invest in productive expenditure with short return cycle and quick effect,as well as people's livelihood expenditure with long return cycle and slow effect,considering their short-term self-interest(emphasizing shortterm goal and neglecting long-term goal).Combining with the first conclusion,this leads to the bias of local government expenditure structure which pays more attention to production and less attention to people's livelihood.The higher the degree of fiscal decentralization,the more serious the bias expenditure of local government is.Thirdly,with regard to the shortcomings in the field of people's livelihood in China,combined with Matland's fuzzy conflict model,this study believes that under the Chinese decentralization system,the central government and local governments can not reach an agreement on the interests when implementing policies in the field of development and improvement of people's livelihood.However,the central government lacks the power,which is the key factor to enable local governments to implement policies successfully.The "political implementation" enables local governments to selectively implement development policies in the field of people's livelihood.Ultimately,local governments neglect the overall and long-term interests of the country in order to realize their local and short-term interests,which results in their expenditure structure being incompatible with the current fundamental purpose of promoting people's livelihood.