The Impact Analysis Of The Fiscal Transfer Payment On Regional Economic Convergence

Since the reform and opening up, China has occurred from a planned economy to a market economy and then the potential of the economy has been greatly released. China’s economy is now showing a sustained, rapid and stable development, and has made remarkable achievements, especially people’s living standards improving significantly and our comprehensive national strength and competitiveness growing quickly. However, with the fast economic growth, the unbalanced development and the growth gap among different regions has gradually expanded to become a problem of increasing concern to the academic and political circles.With the proposed balanced regional economic development strategy, our country has been implementing the western development strategy, the strategy of revitalizing northeast old industrial base and the strategy of central China, and then the fiscal transfer payments come to become the means of national macro-control to reduce regional development disparities and to promote regional economic growth convergence.Around the issues of the convergence of economic growth, economists from different angles use different methods of empirical and theoretical analysis of the causes and mechanisms for the formation of gap convergence study and propose appropriate policy recommendations, forming a large number of theoretical results and helping the central government make policy suggestions of regional development. This paper mainly studies the impact on the economic convergence of fiscal transfer payment, using1995-2011provincial panel data based on the extended Solow model especially considering the difference of the east, middle and west regions.This paper is divided into five chapters, the first from the research background and significance, explaining the research value of the article, and then summarizing the results of theory and research related to economic convergence. The first part also includes a variety of empirical analysis and evaluation of the economic convergence of research and then introduces fiscal transfer payment theoretical research, and summarizes the research focused on the fiscal transfer payments to regional economic growth convergence area.Secondly, this paper describes the mechanism of the impact of financial transfer payments to regional economic disparities, describes in detail the definition, classification, role and impact of fiscal decentralization noting the fiscal transfer payment can balance the regional public spending and then the regional economic development level and then finally reducing regional economic disparities and promoting regional economic convergence.Again, this paper uses index analysis and empirical analysis of β convergence to research regional economic convergence problems. On the one hand, the paper describes the evolution trend of regional disparities since the reform and opening up by calculating and decomposing1978-2012National Theil index and calculates the contribution of internal and inter gap to the overall. On the other hand, this paper uses panel data of China’s provinces by fixed effects and random effects from different time periods and regions to valid regional convergence. The dependent variable is per capita GDP growth rate and the independent variables are the fiscal transfer payment, human capital, physical capital, the overall population growth rate. This paper mainly analysis the relation between the fiscal transfer payment and the economic growth and economic convergence for China, eastern, central and western four major.Finally, this paper makes corresponding policy recommendations on theoretical analysis and empirical results. Firstly, China should increase fiscal transfer payments to balance regional development disparities. Secondly, it is necessary to increase investment in human capital to drive better and faster economic development to play on a positive role in promoting economic growth. Thirdly, we should continue to increase efforts to support the policy of the central and western regions according to different regional economic development, and make different decisions to take regional advantages, regulate the economic growth.