Inter-regional Competition,Land Finance and Economic Fluctuations
In the process of China's rapid economic development,GDP competition among regions has played a crucial role,which attracts widespread attention.A large number of empirical studies have verified the existence of inter-regional competition and examined its impact on the economy.However,theoretical exploration in this domain is still relatively scarce.In recent years,a few papers introduced the central government's assessment mechanism and local governments'competition into the classical growth model,filling a gap in the economic growth theory regarding discussions on inter-regional competition,while the role of inter-regional competition in economic fluctuations remains underexplored.Will the competitive behavior of local governments transmit or amplify economic fluctuations?What factors will affect this transmission effect?These unsolved questions will be addressed in this paper.This paper constructs a multi-regional dynamic stochastic general equilibrium(DSGE)model with two-layer government and competition among regions and quantitatively analyzes the role they played in the amplification and spill-over effects of housing demand shocks.The results show that housing demand shocks in one region could transmit from the local real estate market to the land market,resulting in an increase in land revenue.Under the administrative assessment of the central government and the asymmetric central-local information mechanism,the local governments have the incentive to use the land revenue from the housing demand shocks on public infrastructure,to attract more labor force and improve the economic output of the region and then yield a better assessment performance.Meanwhile,because of the migration of the labor force and the competition between the two regional governments,the shocks could also spill over to another region.Specifically,the incentive of competition drives the government in that region to respond positively and likewise increase its fiscal expenditure.Although there is no direct surge in fiscal revenue,and no advantage in the competition for the labor force,the economic output and household consumption in that region still increase,eventually leading to fluctuations in overall output and consumption.By changing the parameters and incorporating a more realistic model setting,we test the robustness of the model and further analyze the specific channels of shock amplification and transmission.Considering that labor migration may have a crucial impact on government decisionsin a multi-regional framework,this paper introduces the endogenous determination of labor supply and labor input of the real estate sector into the baseline model.The results indicate that the inclusion of these two mechanisms amplifies fluctuations in the overall output.Furthermore,the paper also incorporates central-local tax sharing and the false declaration of the economic output into the model.The results show that in the extended model,the fluctuations of the investment and output in both regions are smaller than those in the baseline model.The contributions of this paper lie in the following aspects.Firstly,leveraging the central-local assessment mechanism as a catalyst,this paper transforms inter-regional competition into a contest of public expenditure and human capital,which enables the mechanism of inter-regional competition to explain both economic growth and fluctuations in China.Secondly,without the participation of the classic accelerators such as financial friction,this paper employs inter-regional competitive behavior to transmit and amplify single-region economic fluctuations and induce spillover effects to other regions in the economy,which is equivalent to introducing a new accelerator for transmitting and amplifying economic fluctuations.Thirdly,from the perspective of the model itself,this paper introduces inter-regional flows of labor force and tradable goods based on Xiong(2019),enriching the simulation and characterization of interaction among regions.In addition,the paper integrates the institutional background of land finance and inter-regional,inter-industry competition for human capital into the theoretical framework of inter-regional competition,providing a more accurate characterization of the competitive behavior.
Inter-regional CompetitionRegional Allocation of LaborLand FinanceEconomic Fluctuations
万方数据
维普
