Research On The Structure Of Local Government Expenditure

Since the reform and opening-up, China has been undergoing a tremendous revolution in its political, economical and social systems, and people's living standard has been improved step by step. Meanwhile, as the development of the socialist market economy, functions of government at all level in China are changing, that is, their function of economic management are weakening while their social management function are being enhanced. Government expenditure is one of the important basic and means for the government sectors to realize their functions, and the structure of the financial expenditure can reflect their functional tendency. Reasonable and effective supply of public goods to meet the needs of the residents is the main objective of government spending. With the economic and social advancement in China, there are a series of contradictions in the government expenditure structure, for example, the problems of reconstruction of the infrastructures and the underdevelopment of social security systems, such as education and health care, are becoming more and more severe.Under the special system in China, in which politics are centralized while finance is decentralized, the local governments, as the local public goods providers, their behaviors are influenced by various aspects. Residents of public goods demand and the government supply are the main factors which tend to decide the structure of government spending. Thus, the arrangement for the local financial expenditure is uncertain, and whether it can meet the public requirements becomes one of the major factors that influence the structure of the financial expenditure. Government spending as an important means of government macro-control plays an important role in socio-economic development.The study of local government spending structure on influence factors is conducive to better improve the efficiency of public goods, and promote the rational structure of government spending.Based on the previous literatures, from perspectives of public demand and governmental supply, this dissertation analyzes the specific influence mechanism between them and tests them using empirical data. The conclusion is:From the demand perspective of public goods, income levels, demographic factors has a significant impact on the structure of government spending, with a negative correlation with economic constructive and a forward correlation with social services expenditure, while the number of population is not relevant with structure of government expenditure. From the government supply point of view, government competition and fiscal decentralization also significantly impact public goods, with the opposite impact to the role of demand factors.This paper is structured as follows:Sector 1 is the introduction, which includes the backgrounds, significance for studying and main thoughts of writing. Sector 2 summarizes the studies of the current economists on local government expenditure and the influence on its structure. Sector 3 analyzes the influence on the local government supply from the perspective of public goods demand; The analysis of the 4th sector set out from the perspective of local government supply. And based on the fiscal expenditure data from 1978-2007, adopting the econometric model, Sector 5 analyzes the main determinations of the structure of China's local government expenditure.