Fiscal Illusion Hypothesis: Validationfrom Thenortheast Old Industrial Base

Fiscal Illusion Hypothesis originally from Public Choice Theory,Fiscal Illusion hypothesis explains the phenomenon of the constantly growth of government from the perspective of demand,the taxpayer as voters,choosing the government by voting,and the government has to gain the votes by making a series of social welfare policy,from the perspective of taxpayers,when the government expanding public services expenditure scale,taxpayers can enjoy more benefits,while enjoying the increasing public welfare the taxpayers do not aware that social welfare bill will finally been paid by themselves,the net welfare will not increase,Fiscal Illusion will lead the irrational growth of government size and may not conduct to economic development in the long term.From September 2003,as "Some opinions on implementing the strategy of revitalizing old industrial bases in Northeast China" was issued,the strategy of revitalizing northeast old industrial base officially entered the stage of history,with a series of policies including upgrading of industrial structure,economic system transition,employment growth and regional economic integration,the development of the northeast has gain a wide range of attention.Today,as the revitalization of the northeast area economy has achieved initial results,but we still face a series of problems,such as low degree of market competition,the lack of vitality of state-owned enterprises,the insufficient development of private enterprises,the low proportion of high-tech industry,such situations need to be further reformed and developed.Whether from the overall outlook of the country or from the northeast’s own point of view,as for the current financial policy of the old industrial base in Northeast China,some deep-seated problems still have a large part of space to research.This paper analysis the economic development of northeast old industrial base and the government scale by using econometric model and empirical research,According to the analysis results of Fiscal Illusion,a series of feasible policy suggestions are put forward.The innovations of this paper lie in the analysis of the macroeconomic and micro economic policies of the old industrial bases in Northeast China,use econometric model to provide a series of analysis and policy recommendations for the revitalization of Northeast China.According to Northeast China’s financial and economic situation,to make a comprehensive review of the Northeast Old Industrial Base and provide more targeted analysis.From the vertical point of view,this paper analyzes evolution and development of financial policy of the old industrial base in Northeast China in different periods,from the horizontal point of view,analyze and compare the same time’s different economic policies,to outline the development of the Northeast Old Industrial Base microscopically.This paper also analyze the main problems existing in the economic development of the Northeast Old Industrial Base at present,through the combination of quantitative analysis and qualitative analysis,this paper give the interpretation of the problems and counter measures for the revitalization of the old industrial bases in Northeast China.