| The reform of China's fiscal decentralization system has been an essential topic in the field of economic research since China's economic reform began 30 years ago. There has been a rather wide consensus reached among economists, i.e. the reform of China's fiscal decentralization system intensified the competition among at and below provincial level governments which has been becoming a strong incentive of local economic growth. It also benefited the provision of local public goods to much extent and contributed as a foundation to the national high-speed economic growth since 1978. The fiscal decentralization system between the central government and the provincial level governments is mostly embodied in the'tax-sharing system' which also directs the reform of fiscal decentralization system at and below provincial level. Governments at and below provincial level are supposed to cooperate and be divided in the provision of local public goods. However, the reform failed in regulating clearly the provision responsibilities taking by different levels of governments at and below provincial level. It didn't succeed in guaranteeing the fiscal revenue necessary for the self-sustaining of different levels of governments at and below provincial level. The residents are lack of the revealing mechanism to show their preferences for the local public goods and the governments at and below provincial level are scarce of political and fiscal incentive to provide the local public goods efficiently are the other two limitations of the system. These deficiencies are attributable to the rapid expansion of local economic-growth-promoting public goods like highways, subways, light rail, airports and some other urban public services. Of the public expenditure structure, the administrative expenditure keeps rising while the expenditures on education and health services are still far from enough which could be described as inefficiency in local public goods provision.This paper analyzes the provision of local public goods in the context of China's fiscal decentralization system at and below provincial level and deepens the influence research on the provision of local public goods put by institution planning, allocating mechanism and administrative system of the fiscal decentralization system at and below provincial level. Based on the current research, this paper specifies the influences put by the fiscal decentralization system at and below provincial level on the provision of local public goods. Some reforms are therefore suggested to help improve the fiscal decentralization system at and below provincial level and'province-direct-governed county'fiscal system in the intent of improving the provision of local public goods. This paper consists of five chapters as followings.Chapter I is the introduction. This part introduces the research background and needs. After comprehensively reviewing the current research in domestic and abroad, it concludes that the revealing mechanism of residents' preferences and the incentive mechanism of governments at and below provincial level are imperative to the effective implementation of the fiscal decentralization system at and below provincial level. And also, the provision of local public goods varies among different level of governments at and below provincial level due to the practical divergence which means more necessarily positive research. In the rest, the part introduces the framework and methods of this paper and also points out the innovations and shortcomings.Chapter II prepares the theoretic foundation for the fiscal system at and below provincial level and the provision of public goods. It begins from the local public goods theory, the efficient provision of local public goods theory and the counterpart under the system of fiscal decentralization. Then it provides a framework for analyzing the efficient provision of local public goods which should include three aspects, i.e. the institution planning, allocating mechanism and administrative system of fiscal decentralization system at and below provincial level. This is the theory foundation of the following positive research.Chapter III focuses on the reform of China's local public goods provision under the fiscal decentralization system at and below provincial level. After reviewing the institutional change of the fiscal decentralization system at and below provincial level and the consequent provision of local public goods, it concludes the governments at and below provincial level are taking more and more responsibilities in providing the local public goods even to an over-taken share. Meanwhile, as the fiscal decentralization system at and below provincial level furthered, especially after the implementation of 'province-direct-governed county' system, there has been a beneficial change happened to the government at and below provincial level in their expenditures on the provision of local public goods.However, the public expenditure structure at and below provincial level still needs adjusting because the expenditures on the administrative and economic-growth-promoting part still dominate in the whole public expenditure while public-service-type expenditure scares comparatively even after the reform. Among the responsibility shares taken for the provision of the local public goods, the provincial government tends to decrease, the district government almost keeps it unchanged while the county level tends to increase.Chapter IV is the positive analyses on China's provision of district and county public goods. This part positively studies on the district and county's provision ability of public goods and the influences on the district and county's provision of public goods put by the fiscal decentralization system at and below provincial level. This positive analysis extends to compare the different result between the districts who employ 'province-direct-governed county' system and those who don't. After that, it finds out since the reform of 'tax sharing system', the fiscal self-sustaining ability rate of district and county level governments has been decreasing to the much extent. Specifically, as the district Gini coefficient per capita has been around the average level nationally, the county one is close to the warning off-average level. The district and county fiscal Theil index per capita is in a down trend nationally. In the district level, the inequality coefficient within provinces is obviously bigger than that among provinces. The district inequality coefficients within eastern and western provinces are bigger than that within central China provinces. This trend contradicts in an opposite way in county level. Anyway, even employing 'province-direct-governed county' system, the district and county governments still fail in transiting from an economic-growth-promoting government to a public-service-type one due to fiscal deficiency and operational inefficiency.Chapter V is main conclusions and policy suggestions. It starts from making brief conclusions about the former chapters. Then, some suggestions are brought up about the institution planning, allocating mechanism and administrative system of the fiscal decentralization system at and below provincial level intending to provide local public goods more efficiently. At the same time, some policies are also put forward on how to adjust'the provincial government's direct administration over the county government' fiscal administration system.The contributions of this paper are as follows:(1) it sets up a theoretical framework to explain the local public goods supply in China based on development of western fiscal decentralization theory and local public goods supply theory, and on the transformation of local public goods supply under the fiscal system at and below. provincial level in China. Within the theoretical framework the author analyzes the mechanism of how fiscal system at and below provincial level influences local public goods supply, and makes an empirical study accordingly. (2) It analyzes the redistribution effect of decentralized fiscal system at and below provincial level via the simple arithmetic of Gini coefficient and Theil index, and studies the contribution rate of municipal and prefectural government revenue disparities within a province and cross provinces to the revenue disparities of government at all levels in China. It finds that from 1999 to 2006, the Gini coefficient of municipal government revenue is at the average level all along, while the Gini coefficient of prefectural government revenue is close to the critical point of unevenness; the municipal government revenue disparity in a province varies greater than that across provinces, whereas the prefectural government revenue disparity shows an opposite tendency. (3) it makes an empirical study on local public goods supply under the decentralized fiscal system at and below provincial level in China, by analyzing the impact of municipal and prefectural decentralization degree on local public goods in three categories:economic growth (infrastructure expenditure), social service (education fees), and social management (administration fees). On the basis of comparison of the impact on the supply of above three types of local public goods by decentralized fiscal system at and below provincial level between provinces with 'province-direct-governed counties' and those without, it discusses the effects and problems of 'province-direct-governed counties' policy. The author finds that even with the policy of 'province-direct-governed counties', the decentralized fiscal system at and below provincial level at provincial level makes no help for prefectural governments to realize a transformation from'economic-growth type'to'social-service type'. A sufficient prefectural public goods supply may be more likely achieved by enhancing the prefectural government governing efficiency and alleviating its fiscal burden than simply promoting the decentralization among governments of different levels.
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