Yardstick Competition among Municipal Governments over the Education Expenditure under Decentralized System
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| Title | Yardstick Competition among Municipal Governments over the Education Expenditure under Decentralized System
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| Author | Zhou Yahong and Zong Qingqing |
| Organization | Shanghai University of Finance and Economics |
| Email | yahong.zhou@mail.shufe.edu.cn; zongqingqing@126.com |
| Key Words | Municipal Governments; Education Expenditure ; Yardstick Competition; Spatial Panel Data Model. |
| Abstract | The competition among local governments over the expenditure under fiscal decentralized system has been a hot issue in China. China is undergoing the transition stage from the pursuit of economic growth to the pursuit of livelihood, providing education services is the important aspect of protecting the livelihood. This paper focuses on the competition among local governments over the education expenditure. We present a simple theoretical model of Chinese-Style yardstick competition “from the top” to explain the existence of interaction among local governments over the education expenditure: the central government reappoint the local officials on the basis of relative performance in providing education services, thus inducing the yardstick competition among local governments. Then, we use the education expenditure data of 312 cities in China between 2007 and 2010 to construct the spatial panel data model, and apply GS2SLS and MLE methods under the fixed-effects framework to estimate the reaction function of education expenditure. The empirical results are consistent with our theoretical predictions: there actually is yardstick competition among local governments over the education expenditure, local jurisdictions are more likely to compete with the neighbors that are similar with them economically than these are similar with them geographically. In addition, we find that the fiscal decentralization has significant negative impact on the education expenditure. |
| Serial Number | WP476 |
| Time | 2013-06-26 |
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