Research On Economic Effects Of Fiscal Expenditure Competition Among Local Governments In China

Since the Reform and Opening Up, China’s economy maintained an average annual growth of10%, which is considered a miracle in the world. The reform of economic system, especially the transformation of the financial system runs through the process of China’s Market-oriented Reform. Reform of China’s financial system has been centered in fiscal decentralization, which gradually to give more financial power of local government, to mobilize the enthusiasm of the local government to develop the economy.Under this background, local governments engaged in a fierce competition in taxation and fiscal expenditure for local economic interests and officials’political interests.As the space of local government tax competition gradually decreases, the fiscal expenditure competition evolved into the main approaches of competition between local governments. Based on this, this paper tries to study the fiscal expenditure competition between local governments under fiscal decentralization system, and analyzes the underlying reason of its existence, and explores its distribution pattern from the perspective of spatial, and discusses the relationship between the fiscal expenditure competition and economic growth in China from the theoretical and empirical perspective. Finally, this paper provides policy references to improve the situation of fiscal expenditure competition, and to promote the rational allocation of national resources, so that to ensure the healthy and stable development of economic.Based on the data from1997to2012, this paper found that the fiscal expenditure per capita in a region will rise by0.37405%while that in adjoining areas rise by1%, and the fiscal expenditure strategy response is direct between adjoining areas through the spatial econometric analysis. Secondly, the economic growth effect of fiscal expenditure competition is inconsistent between different regions. The economic effect of fiscal expenditure competition is not significant in the areas with low economic development level. In the areas of medium and high economic development level, the positive effect of fiscal expenditure competition will be greater than the passive effect, which will promote the economic growth.