Fiscal Competition And The Supply Of Non-Economic Public Goods

Livelihood issue is the most prominent social problems at present. Improving the standard of livelihood is the primary responsibility of our government. Moreover, it’s the precondition for the government to obtain support and recognition. Livelihood issue consists of five basic elements. They are education, employment, medical care, social security and housing. This is exactly in the same range as the non-economic public goods.Currently in China, as the infrastructure for representative, the supply level of economic public goods has been greatly improved through more than 30 years of good governance. However, the overall situation of environmental protection facilities, public medical, education and other non-economic public goods are unsatisfactory, and the structural problem between regions is particularly prominent. What factors affect and determine the supply of non-economic public goods? What causes influence the local government making such structural bias in the supply of public goods? In the search for answers to above questions, I found that almost all of the evidence points in one direction:Fiscal competition.In view of this, this paper constructs an analytical framework based on game theory firstly and proposes two hypotheses to research and answer the above questions. (1) The analysis inferred that the supply level of non-economic public goods among the local government is lower by taking the non-cooperative fiscal competition policy. (2) If the local government transfer a part of economic public goods into non-economic public goods, the whole society will achieve a Pareto improvement. Secondly, in order to verify the foregoing theoretical hypothesis, I choose the data from 2002 to 2011 in 395 cities and pick the indicators of basic education, public medical, urban public facilities, the per capita GDP, fiscal competition, financial self-sufficiency rate, population density and other related. Then, I use the panel data regression model to analyze. This paper draws the following conclusions:(1) Improving the degree of fiscal competition will reduce the supply level of non-economic public goods. Under the single assessment mechanism such as GDP, local fiscal revenue and economic growth are the local officials assessment indicators. It’s distorted the local government structure of fiscal expenditure. (2) The more economically developed areas, the higher supply level of non-economic public goods. Just as a virtuous circle, the government which provide more favorable investment environment will attract more talents, foreign investment, increase employment and government revenue. And then it provide a basis for a higher supply level of non-economic public goods. These two empirical results validate the earlier theorists is right. In addition, there are two empirical research discoveries:(3) If the financial self-sufficiency rate of local government is higher, the non-economic public goods supply level will be high too. This shows that the local governments with finance adequate will invest more to the areas such as public health, urban public facilities and other non-economic public goods. (4) Increasing population will make the corresponding non-economic public goods less. Local governments should improve supply levels of the relevant non-economic public goods timely according to the total population and the local population movements.For the above conclusions, this paper put up with the following measures:(1) According to the characteristics of non-economic public goods to divide powers in the intergovernmental; (2) Establish "effective and limited government", and implementation of equalization on the supply of non-economic public goods; (3) Formulate a comprehensive incentive system which is non-economic public goods supply-oriented; (4) Optimizing the fiscal competitive behavior and establish coordination mechanisms among local governments.