Welfare Effects Of Transfer Payments And Local Debt Control

Under decentralization,because of division and adjustment of political power and economic interests,central government begin competing with local government,resulting in vertical externalities.And this will lead to central government to local government transfer payments which is characterized by the emergence of the SBC.To explore the impact of this longitudinal SBC on social welfare,firstly,this paper conducted a review about related theory,including local government competition resulted from division and classic SBC theory.Secondly,build a two-stage dynamic game model,under the perspective of government SBC,whether local government debt is considered is also covered in the model.This paper established a game model to prove a number of propositions and gives the empirical analysis,the main conclusions are summarized as follows:(1)The mercy of central government led local government’s SBC,namely through debt and public investment.(2)Public investment means more local governments by the central government to take the transfer payment to complement the local government’s financial gap.Because of this the central government and local government vertical externality,the SBC may be able to promote social welfare;(3)In the circumstances that local government’s debt is unlimited,SBC can effectively stimulate spending and transfer payments from public central government.The innovation of this paper is that put the local government debt,the central government transfer payments and SBC into a unified framework,and analyze the impact of the social welfare system created;Explore various elements’ effects to industry agglomeration and related industrial cooperation mechanism under free market and government intervention,which is conducted by model derivation simulation methods.Explore the plight of industrial distribution under free market mechanism from the perspective of welfare economics and gives way to break the dilemma.Use econometric methods for empirical analysis,and gives policy recommendations:1)under the current financial system,severe mismatch financial authority and powers of local government.Should be given to local governments and powers to match the financial rights,powers and financial authority to establish the basis of a system that matches the policy level,improve the tax statutory taxation basic framework will promote sustainable economic development in the process will not lead to serious social injustice phenomenon.(2)With economic development,resource competition will become unsustainable,if economic growth remains as the primary indicator for assessing local government,then the faster economic growth will be accompanied by a decline in the overall social welfare,it is necessary to weaken the region Economic growth in the local government authority in the performance evaluation index weight,build an effective incentive mechanism to control the local government investment impulse.A good policy recommendations is that the Chinese-style decentralized governance model to GDP growth in the performance-based performance evaluation mechanism to adjust to economic stability a priority and part of a broader assessment mechanism Minsheng government level,and other indicators of environmental quality.(3)the central and local property rights and powers for further scientific and rational division to further improve fiscal decentralization balancer-transfer payment system.Increase transfer payments from the central to resolve financial centralization of powers and financial authority after mismatch.Only in this way can the true sense of the financial problems of administering the SBC.