The Research About The "Province-direct-country" Fiscal Reform’s Effect On The Efficiency Of The Country Government Fiscal Expenditure

Country economy is the basic unit of the national economy, and is playing an important role of the economy’s development. The development of the country economy makes great sense in building a moderately prosperous society, solving the problems on "Countryside, Agriculture and Peasant" and constructing socialist harmonious society. On the one hand this is a slowdown in economic growth and revenue growth, on the other hand, expanding domestic demand and to encouraging investment will development our economy well, for the above reasons, there is a strong demand to tax cuts. In addition, our law doesn’t allow the county government to raise a loan, through increasing revenue to realize the country government’s functions is playing a limited role. In this context, it is urgent to improve country government’s expenditure efficiency. Under the "city governing country" financial system, there are following questions:Financial authority and powers asymmetry and the city government and the municipal government trapping county government financial resources. The questions above aggravated country financial difficulties. In order to eliminate the "City governing County" system’s drawbacks and ease county financial difficulties, in2009the Ministry of Finance proposed "the advice on promoting the’province-direct-country’fiscal reform, and required the reform be performed in2012across the country."Province-direct-country " changed the original competition. It not only makes the county government compete with the county government on the same level, but also compete with the municipal government. The competition is fiercer. We need to make specific analysis on what effect the changes of the competitive status and extent do to the fiscal expenditure efficiency.The expenditure efficiency in this article is referred as followed:the government adjusts economic operation, optimizes resource allocation of production factors to achieve the best economic results through rationally using fiscal expenditure means. It is consistent of fiscal expenditure scale efficiency and structure efficiency. In this article, firstly, we use per capita expenditure as the input indictor, and use the general public services, education, health, social security, infrastructure and economic performance as output indicators, then we measure from2001to201155counties in Hubei Province fiscal expenditure efficiency. Secondly, we use the panel regression analysis to verify that the fiscal decentralization has a significant impact on the fiscal expenditure efficiency. Thirdly, on the basic of the result of the second step, we estimated the effect of "province-direct-country" to the country expenditure efficiency by the double-difference model.In this article, after estimating the expenditure efficiency of the countries in Hubei province, we find the following conclusions:(1) Overall, the countries expenditure efficiency is lower, generally maintaining below0.5. In most years, the average efficiency of fiscal expenditure structure is significantly lower than the average scale efficiency. It shows that unreasonable expenditure structure of county government is the main reason for the lower expenditure efficiency.(2) Every country’s Inter-annual expenditure efficiency is stable, but in every year, the expenditure efficiency gap between counties has continued to widen, especially after "provincial governing county" reform started in2004, structural efficiency gap between the countries is widening.In this article, firstly, we verify that fiscal decentralization has significant impact on the fiscal expenditure by use of the empirical analysis. Secondly, we use the double-different model to estimate "province-direct-country" reform’s effect to the expenditure efficiency, the result shows that the "province-direct-country" reform makes significantly positive effect to the expenditure efficiency and scale efficiency, and makes significantly negative effect to the structure efficiency. We can infer from the result that the country government obtains more revenue power, decision-making power and more flexibility to determine the appropriate scale of expenditure in accordance with the county realities from the "province-direct-country" reform. But there also exists the negative impact:the structure of the fiscal expenditure is deteriorated. After the reform, the provincial government regulation is not in place, and the municipal government has no power to govern the country government. And the public implement ineffective supervision and restraint to the government expenditure. In addition, there are some short-term performances of the government officials, such like the pursuit of political achievements. The above reasons may be relevant to the negative impact. In addition, per capita GDP, population density, level of education, extend of urbanization and per capita infrastructure investment has positive effect to the fiscal expenditure efficiency. Per capita budget revenue and per capita budget expenditure have negative effect to the fiscal expenditure efficiency.According to the conclusions above, the following advice is suggested: Rationalize the relationship between government and the market, accelerate the transformation of government functions and build service-oriented government; promote the "province-direct-country" administrative reform; improve the performance appraisal mechanism for local officials, deepen the reform of personnel system; define the province government and municipal government’s regulatory focus to the country government, etc.