Study On The Impact Of Fiscal Decentralization On Poverty Alleviation

Poverty is a major concern and a difficult problem for all countries.If the poverty population is calculated by the line of 2,300 yuan per person per year which was set in 2010,China,as a developing country,had more than 770 million poor people in 1978.By 2012,the number of poor people in China was less than 100 million.By the end of 2017,only 30.46 million people were living in poverty.The impoverished population is shrinking substantially and the impoverishment rate is decreasing sharply to 3.1%.The Nineteenth National Congress of the Communist Party of China(CPC)proposed that in 2020,on the basis of building a well-off society,China should be built into a powerful socialist modernization country with prosperity,democracy,civilization,harmony and beauty in two steps.Poverty alleviation has become the basis of realizing the strategic goal of "two steps",and poverty alleviation has entered a crucial stage of tackling poverty.China's history of poverty alleviation is along with the continuous reform of our financial system.So does fiscal decentralization play a positive role in poverty alleviation in China? To answer this question,we study the effect of fiscal decentralization on poverty alleviation.This paper will use fiscal decentralization theory and anti-poverty theory to analyze the theoretical relationship between them and the mechanism of fiscal decentralization on poverty alleviation.Then I will design an empirical model.Based on the provincial panel data from 1986 to 2014,this paper empirically examines the relationship between fiscal decentralization and poverty alleviation in China,and draws the policy recommendations that according to the present situation and the conclusion of fiscal decentralization and poverty alleviation in China.I hope this paper can provide some suggestions for China to win the final victory of poverty alleviation as well as solve other social and economic problem.Besides it is a great honor to provide a reference for other developing countries to solve povertyproblems.The full text is divided into six parts: the introduction part includes the background,significance of the study,literature review at home and abroad,innovation and shortcomings of the study;the second chapter is the theoretical basis,mainly including the definition of related concepts and related theories;the third chapter is mainly about the based on theoretical reference.Chapter 4 is about the present situation analysis of fiscal decentralization and poverty alleviation;In chapter 5,I will build a regression model on the basis of Chapter 3 and tests the hypothesis based on the provincial panel data of China from 1986 to 2014;Chapter 6 is about the conclusion of the study,policy recommendations and research prospects.The conclusions of this paper are as follows: Fiscal decentralization has a non-linear effect on poverty alleviation.When the degree of fiscal decentralization is low,fiscal decentralization has a positive impact on poverty alleviation,but excessive fiscal decentralization is not conducive to poverty alleviation.Under the fiscal centralization system,the central government has the ability to provide cheaper pro-poor public goods.However,the central government misunderstands the local demand,which results in that the level of pro-poor public goods provided by the central government does not match the local demand.Thus,fiscal centralization is not conducive to poverty alleviation.Under the fiscal decentralization system,local governments have information advantages in the allocation of resources,so they can better provide various public goods to meet local needs.What's more,local governments are under the closer supervision of local residents when they assume the responsibility of providing public goods services.Thus they are more motivated to exercise their government functions to seek greater benefits for the public and to fight against poverty.However,excessive fiscal decentralization is not conducive to the full play of local government information advantages.On the one hand,with the development of economy,public preferences will change,and public demand for public goods including soft public goods(morality,law,organization and rules)will begin to rise.Unfortunately,local governments prefer to produce local hard public goods(objective goods)which are not in urgent need of the public,but can bring greater utility to them.As a result,the deviation between the supply and demand of public goods increases.The supply of hard public goods is excessive,while the supply of soft public goods is insufficient.(Ding Juhong,Deng Kebin,2008);On the other hand,excessive fiscal decentralization has increased pressure on local governments to compete for economic growth,making local governments turn a blind eye to local demand information.Local governments focus on productive investment with higher returns,while neglecting pro-poor expenditure.What's more,due to decentralization,the central government ignores pro-poor expenditure.Cost efficiency advantage has also been weakened,resulting in excessive fiscal decentralization.Poverty can't be alleviated.Based on the above conclusions,the policy proposals put forward in this paper :(1)Adjusting the level of fiscal decentralization,making full use of the technology advantages of the central government and the information advantages of the local government.(2)Increasing expenditure on poverty alleviation and increase the proportion of special funds for poverty alleviation.(3)Optimizing the structure of fiscal expenditure and establishing a long-term restraint and incentive mechanism.