Fiscal Decentralization、Local Government Competition And Macroeconomic Performance

For more than 40 years since the China reforming and opening up,fiscal decentralization as a key institutional arrangement that combines politics and economy and adjusts the vertical intergovernmental interest structure,has a profound impact on the macroeconomic performance of a country and a region.The fiscal system that has entered a new stage of development has been placed at the level of national governance and incorporated into the national governance system.Therefore,standing in a new historical position,straighten out the relationship among powers,responsibilities and interests in governments,to improve the incentive and competition mechanism between governments,standardize government behavior,optimize government functions,and grasp and understand the issues deeply in the financial field from the perspective of the overall development of the party and the country,has always been an important research topic in the social sciences.Ethnic regions as an important part of national governance,it has both generality and particularity compared to other areas due to factors such as history,culture,natural environment,economic structure,and customs.Based on this,this paper takes ethnic regions as the research object,based on the institutional background of fiscal decentralization in China,and on the basis of existing research,look back to the reform process of fiscal decentralization in detail,and deeply describes and analyzes the characteristics of local government competition in ethnic regions,and attempts to incorporate fiscal decentralization,local government competition and macroeconomic performance into a unified theoretical analysis framework,expound their relationship and effect logic,and various index are created by global principal component analysis(GPCA),entropy method,coefficient of variation method etc,Various index systems are empirically tested by using the Spatial Durbin Model(SDM)and the mediating effect model.At the same time,this paper adopts a method combining normative and empirical analysis to further elaborate and analyze the policy of transfer payment as a policy compensation for fiscal decentralization system,and as a tool for fiscal redistribution whose effect of fiscal imbalances vertical and horizontal and moderating effect of equalization of public services in ethnic regions.The key conclusions of this paper are:First,from 1978 to 2019,the fiscal decentralization degree on both of income side and expenditure side in ethnic regions are increased trend.On the income side,the fiscal decentralization of the eastern and central regions and ethnic regions showed a consistent trend,but the eastern region was significantly higher than the central and ethnic regions.On the expenditure side,the fiscal decentralization degree of the eastern,central and ethnic regions also showed a consistent trend of rising slowly.The fiscal decentralization degree on the expenditure side showed obvious regional differentiation after the tax-sharing system reform.Second,the competition between local governments in China is limited and decentralized,Competition methods can be divided into tax competition,expenditure competition and promotion competition.By using the GPCA measuring method,it is concluded that from the national point of view,the competition level of local governments is increasing,but shows a regional imbalance.The competition level of local governments in ethnic regions is similar to central regions,except for Tibet and Qinghai,which have relatively high policy support from the central government,but there is a clear gap with the developed eastern regions.Through DTW cluster analysis,it is concluded that the competition of local governments in ethnic regions has a certain degree of dispersion,while the level of competition among local governments with aggregation in spatial distribution.Third,the mechanism of fiscal decentralization on economic performance is divided into direct mechanism and indirect mechanism.Under the arrangement of the fiscal decentralization system,on the one hand,it directly affects economic performance through the resource allocation mechanism;on the other hand,local governments implement competitive strategic behaviors based on public interest motives,political interest motives and officials’ private interest motives and affect the production level and efficiency of the private sector,thereby give an indirect impact on economic performance.Through empirical testing,after incorporating spatial factors,the decentralization reform at the level of fiscal revenue and expenditure in ethnic regions has formed a local and grassroots supporting response mechanism under China’s unique political system and administrative management system.The central government,through a strong incentive mechanism,enables the local governments to implement competitive strategies and behaviors based on certain interest motives,which have a positive impact on the economic reform and development performance of ethnic regions.However,the direct effect mechanism of fiscal decentralization on macroeconomic performance in ethnic regions has not been effectively brought into play,and its public goods allocation efficiency,supply quality and government revenue and expenditure structure need to be optimized and improved.Fourth,in the past ten years,transfer payments have played a certain role in regulating the vertical fiscal imbalance in ethnic regions.Transfer payments narrow the financial gap between ethnic regions and the eastern,central regions s,especially after 2014.However,due to differences in term of resource endowments and economic development levels,there are still financial gap among provinces in ethnic regions and the gap has not improved in more than ten years.Transfer payments have a negative incentive for constructive spending in ethnic regions,a neutral effect on maintenance spending,and a strong positive incentive on welfare spending.From 2007 to 2019,there were obvious regional differentiations in the level of public services in China.The level of public services in the eastern region was significantly higher than that in the ethnic regions and central regions,and the ethnic regions did not narrow the gap in the level of public services between developed areas due to relatively large transfer payments acquirement,that indicating that transfer payment system in China need to be improved in terms of the horizontal balance function of public services.Finally,based on the research conclusion,this paper proposed four policy suggestions,one is to further deepen the reform of the fiscal decentralization system,the second is to strengthen the incentive mechanism between the central government and ethnic regions,the third is to improve the transfer payment system,and the fourth is to promote healthy competition between local governments in ethnic regions,which is aimed at promoting the development of fiscal system in ethnic regions,and promoting the modernization of the fiscal governance system and governance capacity in ethnic regions.