Research On The Mechanism And Effect Of Local Fiscal Expenditure On Urban-Rural Income Gap Under Fiscal Decentralization

Since the reform and opening,China's economy has maintained rapid growth and brought about a general improvement in the living standards of urban and rural residents.At the same time,the income gap between urban and rural residents has been widening with the development of the economic level and showing a ladder-shaped upward trend with the deepening of the system reform.According to the data of the National Bureau of Statistics,China's Gini coefficient reached a peak of 0.491 in 2008,then declined slightly,to 0.467 in 2017,still exceeding the internationally recognized 0.4 warning line.According to the grouping calculation of urban and rural areas,the total income gap of urban,rural and urban areas constitutes the overall income gap.Many studies show that the huge income gap between urban and rural areas in China is the main reason for the excessive income gap.To narrow the income gap between urban and rural areas and then reduce the overall income gap has become a major challenge for the Chinese government and all sectors of society.In fact,the Chinese government has been working to narrow the income gap between urban and rural areas.The No.1 document of the central government concentrates on the problems of farmers,rural areas and agriculture every year.In recent years,a series of benefiting farmers,subsidies and other supporting policies(such as investing in rural infrastructure,improving social security and poverty alleviation projects,etc.)issued by the central government in coordinating urban and rural development are helping rural development,effectively promoting the increase of farmers 'income,and the growth rate of farmers' income continues to be faster than that of urban residents.Comparing the per capita disposable income of urban and rural residents with the per capita net income of rural residents,we can see that the income gap between urban and rural residents in 2010-2019 has a general trend of narrowing,but the degree of narrowing is slow and the effect is not obvious.In 2019,the per capita income ratio of urban and rural residents is still as high as 2.64,and in some western provinces,the ratio is higher than 4.0.If the definition of rural and urban households and non-monetary factors such as housing,health care,education,transportation and public services(invisible income)are considered,the income gap between urban and rural residents will be greater(Li Shi,2018).Overall,according to international data,the ratio of urban to rural per capita income in most countries is less than 1.6,and only three countries have a ratio of more than 2.China ranks among them,and the ratio of developed countries is generally maintained at about 1.5,China's urban-rural income gap is one of the largest in the world.Obviously,the excessive income gap between urban and rural areas not only means that urban and rural residents do not share the fruits of reform and opening up equally,but also leads to the loss of social welfare,which is not conducive to the harmonious and stable development of the economy and society,and seriously affects the process of building a well-off society in an all-round way.Therefore,how to effectively consolidate the trend of narrowing the income gap between urban and rural areas,improve and optimize the pattern of income distribution between urban and rural areas,has become a major and practical problem to be solved urgently in the national macroeconomic management and social and economic system reform.Optimizing resource allocation,adjusting income distribution and stabilizing economic growth are the three basic functions of public finance in the modern market economy.Under the market mechanism,the unfair income distribution makes it difficult for the market mechanism to play its due effectiveness,which provides the rationality and necessity for the public finance to adjust the resident income distribution.The key to solve the problem of income inequality is that the fiscal expenditure policy must play its due role in narrowing the income gap.As a carrier of public resources allocation,local finance is an important mechanism to improve the efficiency of public goods supply and has become an important direction of public sector reform.However,from the perspective of fiscal decentralization,under the multiple incentives of political,economic and personal interests,local officials tend to devote more financial resources to economic fields and urban areas that are conducive to achievement in order to maximize personal utility.This distorted behavior of local governments leads to the urban bias of the supply of public goods,which becomes the institutional root of widening the urban-rural income gap in China.Therefore,China's urban-rural income gap must be put into the framework of fiscal decentralization for in-depth analysis.Choosing the effect of fiscal expenditure on urban-rural income gap as the research topic can further enrich the existing research on the factors affecting urban-rural income gap,and provide some new theoretical ideas for further alleviating urban-rural income gap.Based on fully understanding and analyzing the current situation of urban-rural income gap in China,and in view of the background of china-style fiscal decentralization,this paper focuses on a systematic and in-depth analysis of the underlying causes of the preference of local fiscal expenditure to cities and the mechanism of the impact of itemized fiscal expenditure on urban-rural income gap,and empirically examines the actual effect of local fiscal expenditure on urban-rural income gap and income source gap.The main contents and research conclusions of this paper are as follows:First,based on the basic fact of fiscal decentralization in China,this paper analyzes the incentive mechanism faced by local governments and officials under fiscal decentralization and its influence on the behavior choices of local officials,and then constructs an analytical framework for the impact of local fiscal expenditure on urban-rural income gap under fiscal decentralization.The growth-oriented incentive mechanism shaped by Chinese fiscal decentralization distorts the inter-governmental relations and government behaviors,leading to the serious bias of local government decision-making behaviors,especially the urban bias of fiscal expenditure policies.Chinese fiscal decentralization is the institutional reason for the alienation of local behaviors and the urban-rural income gap.Second,it theoretically analyzes the influence mechanism of local fiscal expenditure on urban and rural residents' income gap.By constructing a mathematical model of the influence of local fiscal expenditure on urban-rural income gap,a theoretical model of the influence of local fiscal expenditure on urban-rural income gap is constructed.And we analyze the influence mechanism of fiscal expenditure on education,social security,investment expenditure and medical and health care on urban-rural income gap.The results show that the urban-rural gap between local fiscal expenditure on education and medical and health care is the main reason for the difference in the formation and accumulation of urban and rural human capital,which exacerbates the urban-rural wage income gap.Fiscal investment expenditure makes the gap between urban and rural infrastructure huge,exacerbates the gap between urban and rural production and operation environment,and leads to the narrowing of the gap between urban and rural family operating income.Fiscal social security expenditure makes the gap of social security input between urban and rural areas too large,and aggravates the gap of urban and rural transfer income.Third,on the basis of statistical analysis of the dynamic evolution of the urban-rural overall income gap and the sub-income source gap,using the Gini coefficient and its decomposition method,the Gini coefficient of urban and rural residents income gap measure and decompose the various sources of income contribution to the income gap between urban and rural areas,it is concluded that the salary income and transfer income gap between urban and rural areas is the main source of income gap between urban and rural areas construction.The results of the measurement and decomposition of the impact of fiscal expenditure on urban-rural income gap shows that there is no substantial change in the local fiscal expenditure bias,and the local fiscal expenditure is still playing the role of widening urban-rural income gap overall.Fourth,the paper empirically examines the impact of fiscal expenditure on urban-rural income gap under fiscal decentralization at the national and regional levels.Using dynamic panel data,a systematic generalized moment estimation method(GMM)is used to examine the influence of local fiscal expenditure structure on urban-rural income gap and urban-rural income source gap.The test results show that:at the national level,local fiscal expenditure still widens the urban-rural income gap on the whole,while fiscal decentralization will further expand the negative impact of various expenditures on the urban-rural income gap,and the mechanism for fiscal expenditure policy to play a role in adjusting the income gap has not yet been formed.In addition,there are differences in the impact of each sub-expenditure of fiscal expenditure on the urban-rural income gap.Specifically,the negative impact of fiscal expenditure on the urban-rural wage income gap is gradually reduced,but the overall impact on the urban-rural income gap is still negative.The effect of fiscal and social security expenditure on the income gap between urban and rural areas has changed from widening effect to narrowing effect,and has begun to show the role of narrowing the income gap between urban and rural areas.Fiscal investment expenditure has widened the wage income gap and narrowed the operational income gap.The adverse impact of fiscal health expenditure on the urban-rural wage income gap is gradually reduced,but the overall impact on the urban-rural income gap is still negative.Fifth,based on the previous chapter analysis,from the perspective of financial system and expenditure structure,put forward to further narrow the gap between urban and rural income fiscal countermeasures.We suggest to reform the current fiscal decentralization system from a multidimensional perspective,curb the urban bias of local governments in the allocation of fiscal resources,and establish an incentive mechanism to promote the equalization of public goods supply between urban and rural areas;Reform the current evaluation mechanism of local governments,promote the reform of government transformation,and strengthen the public service function of local governments;The focus of the reform of fiscal expenditure structure is to clarify the expenditure responsibility of local governments and optimize the structure of fiscal expenditure.The allocation of public financial resources should get rid of excessive bias toward urbanization,balance urban and rural development,and gradually move toward the right path of optimizing supporting agricultural expenditures.