Abstract: The fiscal expenditure and expenditure competition of China’s local government are important driving forces of economic growth on the institution background of “Federalism, Chinese Style”, but also brings about a lot of negative effect such as widening urban-rural gap, unbalanced tendency of fiscal expenditure structure and regional market segmentation. Based on China’s provincial data from 1985 to 2009, this paper utilizes the conditional directional distance functions (Simar and Vanhems, 2012) to calculate the economic growth efficiency which includes both positive and negative outputs led by fiscal expenditure competition, and then uses spatial panel data model to analyze the effect of expenditure competition to economic growth efficiency. The empirical research shows that, fiscal expenditure doesn’t have significant effect on economic growth efficiency, but fiscal decentralization has significant effect on economic growth efficiency. Meanwhile, there is nonlinear relation between expenditure competition and economic growth efficiency. So we suggest that central government should construct a “moderate competition” mechanism to promote economic growth efficiency.
Keywords: Fiscal Expenditure Competition, Economic Growth Efficiency, Conditional Directional Distance Function, Spatial Panel Data Model
source:Finance & Trade Economics ,No10,2013