Study On The Impacts Of Government Decentralization And Fiscal Competition On Shadow Economy

Shadow economy exists all over the world,and the size of China's shadow economy can't be ignored.Relevant research shows that in recent years,the proportion of China's shadow economy size to GDP is between 10% and 20%,and its absolute size is still large.Shadow economy has a wide impact on the political,economic and social development of countries and regions.With China's economic development entering a new normal and social development entering a new stage,the impact of shadow economy on regional corruption,tax evasion,income inequality and the quality of economic development deserves special attention.Existing studies have paid more attention to the impact of intuitive factors such as government regulation,tax burden and unemployment on the shadow economy,but lacked the analysis of institutional factors affecting the shadow economy.Starting from the two dimensions of vertical decentralization and horizontal government competition,this paper makes an analysis of the institutional factors affecting the size of regional shadow economy in China,and tries to put forward policy suggestions for improving the relationship between decentralization and competition in China from the perspective of restraining regional shadow economy.This paper uses various methods to study the following problems: firstly,using various methods to calculate the size of the shadow economy in China,so as to accurately analyze the size,causes and effects of the shadow economy in China;secondly,analyzing the influence and mechanism of the decentralization of the government on the shadow economy in China;and thirdly,analyzing the influence and mechanism of the decentralization of the government on the shadow economy in China.The fourth is to identify the mode characteristics of local government tax competition and analyze its impact and mechanism on the shadow economy.On the basis of a comprehensive review of the above problems and from the perspective of governance of shadow economy,this paper puts forward policy suggestions for improving the decentralization system of our government and standardizing the competition behavior of local governments.Firstly,this paper defines the three core explanatory variables of government decentralization,fiscal competition and shadow economy,and then determines the dimension of this study.That is,from the perspective of fiscal decentralization and administrative decentralization,it studies the influence and mechanism of government decentralization on shadow economy,and from the perspective of fiscal expenditure competition and tax competition,it studies fiscal competition.The influence and mechanism on the shadow economy.Then,starting from the new institutional economics,fiscal decentralization theory,government competition theory,tax burden and tax loss theory,combined with the causes and characteristics of shadow economy,this paper makes a theoretical analysis of the mechanism of government decentralization and fiscal competition affecting shadow economy,and puts forward relevant hypotheses.Specifically,from the "efficiency effect" and "deterrence effect" of government decentralization,this paper analyses the corruption mechanism,public goods supply mechanism and marketization mechanism of government decentralization affecting shadow economy,and from the "spillover effect" and "factor flow effect" of fiscal competition,respectively,analyses fiscal expenditure competition and tax revenue.The spillover effect mechanism and factor flow effect mechanism of competition affecting shadow economy are also analyzed.In addition,the "tax reduction effect" mechanism of tax competition affecting shadow economy is also analyzed.Secondly,this paper uses a variety of methods to calculate the recessive economic scale of China's whole country and regions over the years.By comparing the existing methods of estimating the scale of implicit economy,this paper chooses the method of money demand and DGE model to calculate the scale of implicit economy in the past years from 1978 to 2017 in China,and uses the methods of micro-income and expenditure difference,MIMIC model and DGE model to calculate the scale of implicit economy in the past years in 30 provinces of China from 1995 to 2016.The scale is calculated.Although the results of various methods are different,they all show similar trends,and the differences are not significant.In terms of time development trend,the scale of recessive economy in China generally shows a slow downward trend.From the spatial distribution characteristics,the scale of recessive economy in the eastern region is the lowest,while that in the western region is the largest.High.In addition,the results of MIMIC calculation also show that tax burden,complexity of tax system,government regulation,unemployment rate,employment in agricultural sector,corruption and economic openness are the reasons for the expansion of recessive economic scale,while tax structure(direct tax proportion),fiscal freedom and income level can all suppress the recessive growth.Economic scale.In addition,the expansion of recessive economy will significantly increase regional energy consumption,GDP growth rate and income inequality,while reducing regional labor participation rate.Thirdly,from the two dimensions of fiscal decentralization and administrative decentralization,this paper analyses and verifies the impact of government decentralization on recessive economy and its mechanism.By sorting out the process of institutional change of fiscal decentralization and administrative decentralization in China,this paper measures fiscal decentralization from four dimensions: fiscal revenue decentralization,fiscal expenditure decentralization,fiscal freedom and tax decentralization,and constructs the overall index of administrative decentralization and administrative approval decentralization based on the number of regional civil servants and administrative approval items.Indicators.Through the construction of mathematical model analysis,we find that fiscal decentralization can effectively reduce the scale of recessive economy and improve the level of regional public goods supply,but the impact of fiscal decentralization on corruption is uncertain.Empirical tests using provincial panel data from 1995 to 2016 show that fiscal expenditure decentralization,overall administrative decentralization and administrative approval decentralization all expand the regional recessive economic scale,while fiscal revenue decentralization,tax decentralization and fiscal freedom significantly reduce the regional recessive economic scale.The results of mechanism test show that corruption effect,public governance effect and marketization effect are all the mechanisms of fiscal decentralization and administrative decentralization affecting the regional recessive economic scale,but the effects of different forms of decentralization are different.Then,this paper also analyses the impact of local government financial expenditure competition on the recessive economy and its mechanism.The decentralization of Chinese-style government provides institutional space and incentive mechanism for local governments to carry out fiscal expenditure competition.By using spatial econometric analysis,it is found that the fiscal expenditure of local governments in China presents a remarkable "top-to-top competition" trend.Based on the provincial panel data from 1995 to 2016,it is found that fiscal expenditure competition significantly reduces the scale of regional recessive economy.Further analysis shows that both productive fiscal expenditure competition and social fiscal expenditure competition among local governments significantly reduce the regional recessive economy,but maintain fiscal expenditure competition.It has no significant impact on the recessive economy.The supply effect of economic public goods and the flow effect of capital factors are the important mechanism that the competition of fiscal expenditure among local governments affects the recessive economy.In addition,this paper also analyses the impact of tax competition on recessive economy and its mechanism.The study finds that decentralization of fiscal expenditure significantly reduces the intensity of "bottom-to-bottom competition" in local government taxation,while tax decentralization significantly increases the degree of "bottom-to-bottom competition" in local government taxation.Under the system of fiscal revenue centralization and fiscal expenditure decentralization,the macro-tax burden among local governments also shows a significant positive spatial spillover effect.Under the constraints of budget constraints and financial pressures,there is no bottom-to-bottom tax competition among local governments.By building a spatial econometric model,it is found that tax competition among local governments in China has significantly reduced the scale of regional recessive economy.It is further found that the competition of enterprise income tax and indirect tax also have the same impact on the recessive economy.The results of mechanism test show that the local government tax competition has significantly expanded the regional recessive economy scale by increasing the actual macro-tax burden level of the region;the local government tax competition has significantly improved the regional economic public goods supply level,and thus reduced the regional recessive economy scale;the tax competition has been launched for the region.By providing more financial security,exhibitions can attract more capital inflows,thus reducing the size of the recessive economy.Finally,based on the above analysis and analysis results,this paper puts forward policy recommendations from the perspective of perfecting fiscal and taxation system and restraining the scale of recessive economy,including: optimizing the division of financial rights and powers between governments;standardizing tax competition among local governments;optimizing fiscal expenditure competition among local governments;and improving fiscal penetration in China.We should improve the system of tax collection and management,the system of socialist market economy and the optimal allocation of factors of production.