Delivery and Appropriation
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| Title | Delivery and Appropriation
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| Author | Yao Dongmin, Yang Guang, Wang Qizhi and Li Junlin |
| Organization | Central University of Finance and Economics; China Construction Bank; Renmin University of China |
| Email | yaodongminn@163.com；yangguang1990188@ruc.edu.cn；wangqizhi90@126.com；junlin.lee@ruc.edu.cn |
| Key Words | Financial Contracts between Central and Local Governments; Optimal Contract Design; The Relationship of Financial and Administrative Power |
| Abstract | In order to explore the inner motivation of the evolution of the relationship of financial power and routine power between the central government and local government, we considered the relationship as a kind of contractual relationship and applied it into the analysis framework of contract theory, and studied how the central government as a client avoid the opportunism behavior of agents and realize its own effectiveness maximization through design and adjustment of the contract. The main idea of the article is as follows: any change in the tax system is the optimal arrangement of system designers after considered the changes in external condition and their own goals. The core point of this paper is as follows: given the cost of effort, the central government would give local governments with lower ability less fiscal decentralization degree as he paid more attention to it, but give the local government with higher ability more fiscal decentralization degree as he paid more attention to it. The conclusion well explains the changes of the financial system in our country, and studies of the central and local financial governance relations in the framework of a contract theory. All this provides a new research idea for correlative research. |
| Serial Number | WP933 |
| Time | 2015-10-23 |
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