Effects Of Provincial Transfer Payments On Lower Level Governments’ Fiscal Efforts In Guangdong Province

Despite the fact that Chinese transfer payment system played a positive role in the financial equalization to some degree, the flaws in the design of the system also makes it cause some "unexpected" effects: the influences on the fiscal efforts of local government. In this regard, the academic community almost unanimously consider that the overall transfer payments will have a negative impact on the local government’s financial efforts, however, the effects that certain transfer payments have on local governments’ financial efforts are debated. In addition, previous studies mostly focused on analysis of central level, the degree of attention is not enough as for the view that is below the provincial level.This paper decides to choose Guangdong province as a study object, to investigate the effects of provincial transfer payments on lower level governments’ fiscal efforts in Guangdong province.Through building the “Transfer payment-fiscal effort” model and the collection 2000~2009 year data of Guangdong province,we can conclude that total transfer payments and tax rebates are dampening fiscal effort of local government in Guangdong province.General transfer payments, although generating a positive incentive effect, but the effect is not significant. Special transfer payments has a positive effect which is significant,but it is far lower than the inhibitory effect of tax rebates.