Optimization Of The Scale And Structure Of China’s Local Fiscal Expenditure

The debt crisis in Europe has a great impact both on the European Union and the world economy. European debt crisis is the result of overdraft national fiscal revenue. At the same time, the scale of China’s fiscal expenditure continues to expand, many unreasonable structure of fiscal expenditure, need to further adjust and optimize. In this paper, by analyzing the size and structure of China’s local fiscal expenditure, to find out a suitable local financial system, in order to avoid slow down of the development of the local economy or even crisis due to unreasonable local fiscal expenditure.The paper is divided into three parts. The first part is the scale of China’s local fiscal expenditure, main depends on Ram’s two departments production model theory, use the threshold regression model to identify the financial expenditure threshold variable, and then find out the optimal value of the scale of local fiscal expenditure. We found that the relation of China’s local fiscal expenditure and local economic growth really has Armey curve, the scale of China’s local fiscal expenditure as a share of GDP was 13.33%, is the most favorable for local economic development.The second part is the study of China’s local fiscal expenditure structure; it is based on Romer’s endogenous growth theory, then find the optimal value of the structure of local fiscal expenditure. The study found that China’s local economic construction expenses, administrative expenses should be reduced, science, education, culture, health spending and social security spending should be increased.The third part is the international comparisons of size and structure of local fiscal expenditure, and then analyzes whether the size and structure of the optimal value of local fiscal expenditure is reasonable. Found out that the optimal value of the scale of the local fiscal expenditure is reasonable compared with other countries. Economic construction spending in the local fiscal expenditure structure, the optimal value of science, education, culture and health expenditures and administrative expenses are reasonable, but because of the special nature of social security expenditure, the optimal value is not consistent compared with the actual situation.