| The Report to the 19 th session of National Congress of the CPC pointed out that the economy has shifted from a stage of high-speed growth to a stage of high-quality development in China.Focusing on improving the quality and efficiency of development has become the main goal of Chinese economic and social development during the “14th Five-Year Plan” period.The modern economic growth theory shows that the improvement of total factor productivity is the driving force and source of high-quality economic development.Moreover,optimizing the pattern of resource allocation and improving the efficiency of resource allocation is one of the most important ways to improve the level of total factor productivity.Therefore,it is of great practical significance for improving the efficiency of resource allocation among regions as well as promoting the high-quality and sustainable development of economy in China to explore the causes of resource misallocation among regions to improve and resolve resource misallocation in China.Since the implementation of the tax-sharing system reform in 1994,driven by economic interests and political promotion,local governments at all levels have launched increasingly fierce domestic horizontal tax competition.However,local tax competition has reduced the role of the market in resource allocation and hindered the free flow of capital and labor,which may lead to a misallocation of spatial resources to a certain extent.Since resource misallocation is one of the most important factors leading to the loss of total factor productivity and total output,the spatial resource misallocation caused by local tax competition may have an adverse impact on regional economic development.In view of this,this paper is based on the objective fact that horizontal tax competition between regions in China is common.After sorting out the existing theoretical and empirical research on local tax competition and resource misallocation,on the basis of measuring the regional capital misallocation index and labor misallocation index,this paper uses the panel data of 257 prefecture-level cities in China from 2000 to 2013 to construct a static panel two-way fixed effect model,a dynamic panel GMM model and a dynamic panel spatial durbin model,which systematically and comprehensively examines the impact,mechanism and spatial spillover effect of local tax competition on resource misallocation in China.The economic consequences of spatial resource misallocation caused by local tax competition are further explored.The main research conclusions of the article are as follows:Firstly,there is a certain degree of resource misallocation in the capital factor market and labor factor market in all cities in China,and the degree of regional resource misallocation not only has path-dependence in the time dimension,but also has a significant positive correlation in the spatial dimension.On the one hand,if the degree of regional capital misallocation and labor misallocation in the previous year is high,the regional resource misallocation in this year will continue to rise.On the other hand,if the region has a high degree of capital misallocation and labor misallocation in the past,it will drive the region’s current resource misallocation to continue to rise;on the other hand,due to the horizontal competition and strategic imitation among various municipal governments in China,the degree of capital and labor misallocation in local-level cities both show a significant positive correlation at the spatial dimension.Secondly,local tax competition has a significant positive impact on capital misallocation and labor misallocation,and this impact has a significant spatial spillover effect—increasing the intensity of tax competition in a region will not only increase its own resource misallocation,but also aggravate the resource misallocation of neighboring regions.By further analyzing the economic consequences of spatial resource misallocation caused by local tax competition,this paper finds that capital misallocation and labor misallocation are also important mediators of local tax competition acting on regional total factor productivity.Although local tax competition has a direct and positive impact on the level of regional total factor productivity to a certain extent,it will lead to aggravation of regional resource misallocation and adversely affect the improvement of regional total factor productivity.Therefore,although local tax competition can promote inter-regional resource flow and optimize resource allocation to a certain extent which can improve regional total factor productivity,excessive tax competition competing to reduce tax rates will distort spatial resource allocation,leading to aggravation of regional resource misallocation,and inhibiting the improvement of regional total factor productivity,thereby having an adverse impact on the quality of regional economic development.Thirdly,the mechanism test shows that corporate location selection is an important mechanism for local tax competition to affect spatial capital misallocation.The regional flow of capital factors is reflected in the location selection of enterprises for a long time.Moreover,the difference in the actual tax rate between regions caused by local tax competition will have an impact on the location selection of enterprises.The greater the intensity of local tax competition means the lower the actual tax rate in the region,which is more able to attract enterprises to enter,thus distorting the normal allocation results of the capital factor market,exacerbating the spatial misallocation of capital factors and loss of efficiency.At the same time,exploring the mechanism by which local tax competition affects spatial labor misallocation,this paper finds that local tax competition significantly reduces the level of regional public goods supply,which reduces the willingness of labor to flow into the region and creates a “push power” for labor in the region.To a certain extent,it distorts the normal allocation results of the labor factor market and exacerbates the spatial resource misallocation of labor factors.Fourthly,the heterogeneity analysis shows that there is significant regional heterogeneity in the impact of local tax competition on spatial capital misallocation,and the different directions of regional capital misallocation will also affect the estimation results.At the same time,the impact of local tax competition on spatial labor misallocation is also heterogeneous.Local tax competition will significantly improve the labor misallocation of the cities for which with insufficient labor allocation,with a total population of more than five million at the end of the year,and which in the east part of China.This effect also has significant spatial spillover effects in cities with insufficient labor allocation and large cities.In addition,there is also regional heterogeneity in the impact of local tax competition and resource misallocation on the level of regional total factor productivity.The direct positive impact of tax competition on regional total factor productivity is only significant in the eastern and central China,while the intermediary of resource misallocation is only significant in the eastern China.The research conclusion of this paper is not only enriching and supplementing the existing literature on tax competition and resource misallocation,but also confirming the necessity of regulating horizontal tax competition among local governments in China and avoiding excessive tax competition from the perspective of improving the quality of regional economic development.Under the new stage of high-quality development our country’s economy,it provides useful inspiration for correcting excessive tax competition among local governments,improving the efficiency of resource allocation between regions,and promoting the quality and efficiency of China’s economy. |
