The Empirical Study On The Effect Of Fiscal Decentralization And Urbanization On Public Spending On Livelihood In China

Since the reform of the tax system in 1994, the management of public affairs of the local government has become increasingly complex. Hence, it is more and more important for the central government decentralizes financial rights to local governments. This study explores the effect of fiscal decentralization on fiscal expenditure. In addition, with the rapid development of China's economy, the pace of urbanization is gradually accelerated. So, in order to support the process of urbanization, the government is bound to pay the equivalent of fiscal expenditure. Therefore, this study examines the relationship between the urbanization and the public expenditure. Overall, this research is to study the effects of both fiscal decentralization and urbanization on fiscal expenditure.Using Chinese panel data over period of 1997-2012, we investigate the effect of fiscal decentralization and urbanization on public spending on livelihood. The results show, first there is a negative relationship between fiscal decentralization and public spending on livelihood. Second urbanization has a positive effect on investment expenditure on livelihood, while has a negative effect on metastatic expenditure on livelihood. Finally, in the process of urbanization, the negative impact of fiscal decentralization on investment expenditure on livelihood has significant slow. Based on these analyses, we suggest that government need to plan expenditure rationally, strengthen supervision of revenue and expenditure of local government, and reform official assessment mechanism, in order to provide long-term incentives for expenditure of livelihood. Moreover, government should establish perfect livelihood system and improve the utilization of fiscal expenditure in the process of urbanization.