China Local Government Competitive Research

After the devolution of China, the motive and ability of which local governments pursue their own economic development become stronger, a competitive relation has come into being between local governments based on microeconomic participator. The dissertation concerns on such a question: what is the impaction of local government competition on local government's intervention under the circumstance of increasing fluidness of goods and factors? Using a more systemic framework, the dissertation also considers some notorious problems in local government invention such as local protection and competition for investors.The second chapter clarifies the difference and connection between the studies on Chinese local government competition and western jurisdictional competition. The third chapter demonstrates main features of local government's behaviors, which provides the foundation to further research. On one side, economics has claim what functions the local government should take on, but what the local government actually take on is co-decided by central government, bureaucracy and resident, which have different desire and implement different constraints. When these constraints change, the object of local government floats. As for China, pursing local economy development can be the main object of local government if the small stresses coming from different blocs were ignored. The local government can use many methods to attain its object, but all the invention can be dividing into two aspects: invention on goods market and invention on factor market. Through discussing on these aspects, we want to know dose the competition for pursing local economy development facilitate the local government shoulder the responsibilities which the economics advise.The fourth chapter is about local government competition on goods market. When the fiscal subsidy rate is used as method to purse economy development, the subsidy rate will be higher as the goods fluidity is increasing, actually, it may be so higher that the fiscal subsidy become huge burden. In order to avoid such situation, local government may cumber the increase of goods fluidity. When the profit extractive rate is used as method, it will be decreased as the goods fluidity is increasing; it implies local government may lessen regulations which influence firm's profit.According to analyzes, the fiscal burden may switch local government invention to local protection. We further probe into China's local protection in the next section. China local protection experienced the process from strong to weak. Industry structure convergence which drive by local government eventually leads to tense competition,fiscal burden and then local protection, but local protection also causes smaller market which do no benefit to firms' grown-up, the goods fluidity's exogenous increase will result in non-competitive industries fade away and regional economic division comes into being, in the other words, deepen of division act as the final impetus to dispel local protection. Of course, the prohibition of local protection from central government forfeits the channel and methods which local government can utilize.In fact, the flooding of china local protection is a phenomenon connect with China economy transformation, and has close relations with other local government invention, so we discuss the question in a more broad background. At the beginning of Open and Reform, local governments have stronger fiscal ability and invention inertia, at the same time, shortage economy and dual-track system provide obviously accrual chances which based on twist price system, all local government endeavor to accrue the profit, repeatedly investment, industry convergence and local protection happens in succession. Nowadays, all these premises do not exist any longer, so local government's intervention on goods market slack up gradually.Contrary to the goods market, they become more interested with attracting factor flowing-in, especially direct investment, so I switch attention to local governments' competitive behavior on factor market in chapter 5. Firstly, we illustrate the general features of capital movement and labor movement, if local governments want to influence the movements, they must follow the factors movement formula. Because local government usually more conservative on immigration and labor movement is in gross consist with capital movement, we only focus on capital movement.Capital can flow from one region to another through finances system indirectly as well as through investment directly. In the former situation, competition for capital will lead local government to provide more infrastructures; capital movement will substitute insufficient labor movement to achieve effective allocation. When the labor movement cost decrease, the infrastructures may decrease. In the later situation, while local government may provide preferential policy, it almost can not alter firm's original location if all of the participators have sufficient information, but the benefits may cut down because of other local government's bidding.In the next section, I try to find the characters of Chinese factor movement. With the Open and Reform policy's development, the importance of different capital movement channel changes, capital movement through fiscal transfer decline rapidly, bank debit and credit still be an important capital movement way, the prominence change is that capital...