Chinese Fiscal Decentralization,Transfer Payments And Expenditure Of Local Government

Fiscal decentralization is the major model of the research for financial relationship between central government and local government,It is also the focus of the research of finance as well. According to the classical theory of fiscal decentralization, fiscal decentralization could encourage improvement of local welfare level and efficiency of administration. Based on previous studies,it is generally recognized in the academic world that:the local government prefers productive expenditure to welfare spending under the influence of Chinese fiscal decentralization.It is apparent that Chinese fiscal decentralization is not able to improve the welfare level of the region. Since the reform of tax system,central government adopt transfer payments to local government in order to balance the financial gap and improve the welfare level.Transfer payment has greatly increased the income of local government, which will be great effect on the behavior of local government expenditure. Through theoretical analysis, empirical model building,this paper is to elaborate how the transfer payment effect the behavior of local government expenditure under the background of the Chinese fiscal decentralization.According to the theoretical and empirical results: with respect to the scale of expenditure, the transfer payments could promote the local government expenditure scale;as to the expenditure structure, transfer payments have produced a positive incentive effect on the productive expenditure and welfare payments, yet it has negatively influenced on government operation cost. Transfer payments is conducive to promoting regional welfare level,but the incentive to productive expenditure is still higher than that of the welfare payments because of the special political governance mode of our country.lt needs to improve the fiscal system,transfer payment system and the official examination mechanism in order to make Chinese fiscal decentralization and transfer payments play a positive role.