Analysis On The Influence Of Fiscal Decentralization On Manufacturing Agglomeration

Manufacturing industry agglomeration is a classic topic in industrial economics.Based on the perspective of fiscal decentralization,this article uses fiscal competition theory and location theory to study the role of China’s government in the process of manufacturing industry agglomeration.The reform of China’s tax sharing system gives local governments a certain degree of financial autonomy,enhances their enthusiasm and autonomy in developing the economy,and has a significant impact on China’s political and economic ecology.Therefore,studying government behavior and manufacturing industry agglomeration under fiscal decentralization has certain theoretical and practical significance.This article studies the impact mechanism of fiscal decentralization on manufacturing agglomeration by analyzing the government incentive structure and the behavioral logic of enterprises under decentralization,and empirically tests it using empirical data.In terms of theoretical analysis,this article demonstrates that China’s fiscal decentralization system promotes local governments to actively develop local economies through both economic incentives to increase fiscal revenue and political incentives to pursue official promotion,and implements competitive behaviors to compete for economic resources and economic activities,thereby affecting manufacturing agglomeration.Specifically,government fiscal competition can be divided into two categories: tax competition and fiscal expenditure competition.On the one hand,competition in taxation can lessen the actual tax load of businesses in the area,cutting costs for them,and draw in manufacturing firms.On the other hand,competition in fiscal expenditure can not only bolster investment in industrial infrastructure,capitalizing on the scale effect of manufacturing agglomeration,but also augment the supply of regional public goods.Besides this,fiscal expenditure competition can optimize the investment environment,improve the level of residents’ utility,attract capital and labor inflows,and promote manufacturing agglomeration.On the empirical level,this article uses panel data from 283 prefecture-level cities from2006 to 2017 to analyze the overall impact of fiscal decentralization on manufacturing agglomeration through a fixed effect model,and uses an intermediary model to explore the mechanism.The research finds that: Firstly,fiscal decentralization has been found to have a beneficial effect on manufacturing industry agglomeration,while the degree of opening up,infrastructure building,market size,and export trade all contribute to its growth.Secondly,there are regional and urban scale differences in the impact of fiscal decentralization on manufacturing agglomeration.From a regional perspective,the improvement of fiscal decentralization in the three major regions can promote the increase of manufacturing agglomeration,with the central region having the most significant effect;From the perspective of city size,in large,medium-sized,and small cities,fiscal decentralization has a significant positive impact on manufacturing agglomeration,with the estimated coefficient of fiscal decentralization in medium-sized cities being the highest and most significant,while the estimated coefficient of fiscal decentralization in megalopolis is not significant.Thirdly,tax competition and fiscal expenditure competition play an intermediary role in the process of fiscal decentralization affecting manufacturing agglomeration.The tax bottoming policy in the central and western regions can better promote the agglomeration of manufacturing industries,while the eastern regions have broken away from this pattern;Fiscal decentralization has intensified fiscal expenditure competition in the central and western regions,improving the overall local social environment and promoting local manufacturing agglomeration.Fourthly,there is a cumulative cyclical causal effect in manufacturing agglomeration.Once formed,agglomeration will attract economic factors to concentrate in the central region,forming a self-reinforcing mechanism.Based on the above research conclusions,the article proposes that we should persist in promoting the reform of the fiscal decentralization system and granting local governments more financial autonomy;implement reasonable fiscal policies in accordance with regional development conditions;give due consideration to the equity of local government competition and improve the transfer payment system;respect market rules and reasonably guide the agglomeration and development of manufacturing industry.