Transfer Payment,Fiscal Decentralization And Local Government Debt

The issue of government debt has always been an important topic of macroeconomic research.After the 2008 financial crisis,the scale of local government debt in China has increased rapidly.At the same time,the transfer payment in China occupies an important position in the current fiscal decentralization system,the study on the effect of transfer payment,Fiscal Decentralization on the expansion of local government debt,in order to improve the Chinese government to resolve the issue of local government debt has important significance to the prevention and control of systemic financial risk.Most of the existing researches focus on the mechanism of fiscal transfer payment on local government's behavior.There is relatively little research on the relationship between transfer payment and local government debt,and there is no unified understanding of its internal impact mechanism.On the basis of qualitative research,the relationship between fiscal decentralization and local debt also focuses on the influence of fiscal decentralization on local debt expansion.From the conclusion of the study,most scholars believe that the relationship between fiscal decentralization and local debt is a positive linear relationship.This article tries to make up for the shortcomings of the existing research.First of all,based on the Barro(1990)and Greiner and Semmler(2000)present research,this paper constructed the transfer payment,fiscal decentralization and local government debt in an endogenous growth model,and the government competition variable is also introduced in the model,in order to investigate the effect of transfer payment,fiscal decentralization for local government debt theoretically.It is found that the transfer payment has a negative correlation with local debt,while the fiscal decentralization has a nonlinear influence on local debt,and government competition has a positive correlation with local debt.Then,established the econometric model according to the theoretical results,using China 2005-2015 provincial panel data for empirical analysis,the study found:1,The empirical results showed a significant positive correlation between transfer payments and local debt different from the theoretical analysis,at the same time,the transfer payment is enhanced by local government expenditure and positive influence on local debt;2,Finance decentralization and local debt shows a nonlinear inverted U relationship similar to the environmental Cruz Neto curve,and the economy at this stage has not yet reached the inflection point of the inverted U curve.3,The transfer payment has regional heterogeneity for the relationship between the local government debt,the specific performance of the eastern region transfer payments and local debt is negatively correlated,and in the midwest,transfer payments and local debt has positive correlation,and fiscal decentralization and local debt in the eastern and western regions have the same positive correlation.4,The two aspects of local government's expenditure competition and tax competition have a significant positive correlation with local debt.Transfer payment mediated by local government competition behavior indirectly leads to the expansion of local debt scale.Finally,according to the results of the empirical study,this paper conducts several policy suggestions:1,Continuous optimization and improvement of the transfer payment system.We should establish and improve the supporting supervision system of transfer payment,improve the transparency of transfer payment fund allocation process.2,The current fiscal decentralization system flow area between the tax base should be improved,while the local government faces too much responsibility and authority does not match the situation need to be properly given certain rights,and to improve the local government to provide public service functions and exercise status of the normal financial shortage.3,We should optimize the promotion mechanism which is used in local officials,and reduce the impulse to invest in debt and excessive tax relief to stimulate the economic development level of the local area.