Study On The Influence Of Fiscal Pressure On Local Governments’ Revenue And Expenditure Behavior And Its Policy Optimization

In recent years,with the aggravation of the contradiction between fiscal revenue and expenditure,local governments are facing a more severe test in terms of fiscal pressure.How to effectively regulate the behavior of local governments to relieve fiscal pressure is an important issue to prevent and resolve financial risks,promote the effectiveness of financial governance,and achieve high-quality and sustainable economic and social development.In order to cope with fiscal pressure and prevent the gap between fiscal revenue and expenditure from becoming too large,it is necessary to find new ways to increase fiscal revenue,reasonably reduce the scale of fiscal expenditure,adjust fiscal expenditure structure,and guide the optimal allocation of financial resources by improving fiscal expenditure efficiency.Although local governments often have strong incentives to adjust behavioral strategies under fiscal pressure,differences in the sources of fiscal pressure will form completely different fiscal incentive mechanisms,which have a very significant heterogeneity impact on local governments’ behavior.In addition,changes in the level of fiscal pressure will also prompt to rearrange fiscal revenue and expenditure activities.Therefore,in the process of coping with fiscal pressure,how the local government’s enthusiasm will change,and what kind of behavioral adjustments local governments will make,still needs to be further investigated.Based on the typical fact that local governments face greater fiscal pressure,this thesis comprehensively evaluates the effect and mechanism of fiscal pressure on local governments’ revenue and expenditure behavior.The research on the above problems can further help to understand the important role of the coordination of intergovernmental financial relations in regulating the behavior of local governments.It’s instructive for the construction of modern financial systems,especially that of sub-provincial.To achieve the research goals,this thesis insists on the combination of historical analysis and comparative analysis,theoretical analysis and empirical analysis.Based on a variety of fiscal revenue and expenditure data,statistical analysis and econometric model(like intensity did method,instrumental variable method,etc.)will be adopted to investigate the research problem.Through a comprehensive investigation,the key conclusions of this thesis are as follows.(1)In the process of the central government concentrating fiscal revenue by improving the ratio of tax sharing and shifting down expenditure responsibilities in stages to pass on fiscal pressure to local governments,the transmission and sharing mode of fiscal pressure between different levels of local governments will have both common characteristics and individual characteristics.In terms of common characteristics,the provincial government generally will follow the central government in the adjustment strategy of fiscal revenue and expenditure distribution relationship,mainly showing the tendency of “shifting fiscal revenue upwards and shifting expenditure responsibilities downwards”.And to some extent,in different provinces,the behavioral strategic of the municipal government is similar to that of the provincial government.In terms of individual characteristics,superior governments in different regions and provinces will dynamically adjust the fiscal pressure sharing model with junior governments according to their own financial conditions.On the one hand,in order to avoid excessive fiscal pressure of their own,the superior government may move up fiscal revenue or keep the ratio of tax sharing relatively stable,while shifting down more expenditure responsibilities.On the other hand,in order to avoid excessive fiscal pressure on junior governments,superior governments may shift some of financial resources down or shift some of expenditure responsibilities upward.What’s more,in the adjustment of the distribution relationship of different fiscal revenues and expenditures,the superior government and the junior government in different regions will adopt more diverse strategic arrangements according to the characteristics of economic and social development.(2)This thesis examines the revenue behavior choices of local governments after the change of fiscal pressure caused by the decline of the original business tax share.It’s found that local governments will have strong fiscal incentives to maintain the stability of tax revenue in response to fiscal pressure,without significantly increasing their reliance on non-tax revenue.Mechanism analysis shows that the fiscal pressure caused by the decline of the original business tax share will effectively encourage local governments to improve the quality of economic development.In this process,corporate income tax revenue will achieve rapid growth,thus better making up for the loss of the original business tax revenue.This also indirectly promotes the increase in the proportion of direct taxes.When the real estate industry is less dependent,the tax and business environment is good,and the city level is higher,due to the better economic development environment,the incentive for local governments to increase tax revenue will be stronger.(3)This thesis also examines the scale change of local government expenditure after the change of fiscal pressure caused by the decline of the original business tax share.The study finds that the tendency of local governments to expand fiscal expenditure will be significantly restrained when fiscal pressure increases due to the reduction of the original business tax share.Mechanism analysis shows that with the increase of fiscal pressure and the decline of fiscal interests,local governments will reduce irregular competition in attracting investment,and then reduce the expansion of construction land,which will help promote economic agglomeration and population agglomeration,form scale effects,and reduce financial costs.In addition,the local government will also reduce administrative costs and effectively avoid institutional expansion.Heterogeneity analysis shows that the improvement of economic development level is conducive to the reduction of the scale of fiscal expenditure.The increase in the total population causing greater and more diverse public service needs,will reduce the space for compressing fiscal expenditure.When fiscal funds rely more on transfer payments,the soft budget constraint will also be detrimental to the decline in fiscal expenditure.(4)On the basis of the aforementioned analysis,this thesis further evaluates the linkage effect between the local government’s land transfer behavior and the adjustment of fiscal expenditure behavior.The analysis finds that the reduction in the proportion of the original business tax share is more conducive to get the fiscal incentive right and guide the behavior of local governments to change from “high land transfer income,high capital construction expenditure” to “low land transfer income,high livelihood expenditure”,though it will cause changes in fiscal pressure.However,for regions with insufficient financial resources and low-quality fiscal revenue,due to the fiscal pressure is already relatively large,the decline in the proportion of the original business tax share will further aggravate the financial difficulties,which will still force the local government to respond by increasing land transfer income and controlling the expenditure on people’s livelihood.Under this circumstance,the above fiscal incentive effect will be suppressed because of excessive fiscal pressure.Considering the importance of land tax has become more prominent after the reduction of the original business tax share ratio,this thesis has also assessed the impact of land taxation on local governments’ behavior.It’s found that local governments’ behavior of “low land transfer and high people’s livelihood investment” will be strengthened with the increasing intensity of land tax collection and management.And compared with the land tax on transaction link,the regulation effect of the land tax on tenure link is stronger.Further analysis finds that the adjustment of fiscal incentive mechanism can help local governments expand their fiscal revenue by “controlling land increments,activating the stock of land,and improving land use efficiency”.This is an important reason why the change in the proportion of the original business tax share and the change in the intensity of land tax collection and management can guide local governments to adjust revenue and expenditure behavior.In fact,after the incentive mechanism changed,corporate behavior can also be effectively transformed.(5)While the share ratio of tax revenue is declining,the expenditure responsibility of local governments is still further increasing.This makes local governments face greater financial difficulties and will readjust their spending strategies.By analyzing the change in the proportions of major fiscal expenditures,it is found that municipal governments will maintain expenditure in some areas while reducing in others in both the production field and the people’s livelihood field to stabilize economic and social development when faced with greater fiscal pressure.Combined with the fact of dynamic adjustment of financial relations between sub-provincial governments,this thesis finds that if the provincial government shifts more expenditure responsibility to the municipal government,it will be detrimental to the further optimization of the local fiscal expenditure structure.Only by shifting part of the expenditure responsibilities to match the municipal government’s own financial resources,can it be more helpful for the municipal government to further take into account the long-term economic and social development while maintaining growth and promoting stability.What’s more,the analysis of heterogeneity shows that the local government’s own preference and resource endowment will significantly affect the choice of its fiscal expenditure strategy.(6)The adjustment of fiscal expenditure structure is closely related to the change of fiscal expenditure efficiency.The study finds that the areas where fiscal expenditure has not been compressed have not yet brought about an improvement in the efficiency of fiscal expenditure,but the areas where fiscal expenditure has been compressed will instead make local governments more motivated to prevent a sharp decline in the efficiency of fiscal expenditure.What’s more,compared with the “quantitative-based” growth of spending scale,the “quality-based” improvement of spending efficiency is a better strategy for local governments to deal with fiscal pressure.Further analysis finds that the impact of fiscal pressure on the expenditure efficiency will have different characteristics due to differences in resource endowment and the ability to allocate financial resources.In order to promote the improvement of the efficiency of fiscal expenditure,it is necessary to take measures according to local conditions.In terms of policy implications,different sources of fiscal pressure will result in completely different fiscal incentives.Local governments between different levels should rationally adjust the sharing mechanism of fiscal pressure from both ends of revenue and expenditure,so as to maintain the fiscal pressure within a moderate range,and at the same time get the fiscal incentive right.Otherwise,excessive fiscal pressure or improper fiscal incentives will distort the local government’s revenue and expenditure behavior.Therefore,forming a reasonable sharing mechanism of fiscal pressure is the key to guiding local government expectations and transforming local government functions.To achieve this goal,it is necessary to construct and improve the local tax system,rationally adjust administrative power and expenditure responsibilities,strengthen the performance management of fiscal expenditures,optimize the transfer payment system,and provide differentiated tax incentives for enterprises to promote the improvement of land use efficiency.The innovation of this thesis is mainly reflected in three aspects.First,this thesis particularly describes the change of intergovernmental fiscal pressure transmission and sharing strategies in different periods and different provinces,which fully reflects the commonality and individual characteristics of the adjustment of tax sharing and expenditure responsibility between governments.This provides the basic factual support for the subsequent analysis.Second,by using intensity did method and other methods,this thesis more accurately identifies the effect mechanism of fiscal pressure on local governments’ behavior.At the same time,considering the differences in the sources of fiscal pressure and changes in the level of fiscal pressure will produce different fiscal incentive mechanisms,this thesis more comprehensively examines the heterogeneous impact of fiscal pressure on local governments’ behavior from both the perspectives of tax sharing and expenditure responsibility adjustment,and reveals the motivity of the change in behavioral strategies.Third,this thesis reveals the differences in the change of local fiscal revenue and expenditure behaviors from multiple dimensions.It can better prescribe the right medicine and deal with local fiscal pressure through different paths.