FINANCIAL DEVELOPMENT,FISCAL DECENTRALIZATION AND REGIONAL ECONOMIC DISPARITY

Abstract

In this paper the author investigates the effect of regional finance on economic disparity and the effect of fiscal decentralization though using panel data analysis to analyze 28 provinces' statistics from 1990 to 2004. The results show: in the east region and west region the financial development has a positive effect on the regional economic growth. But in the middle region and northeast region the financial development has a negative effect on the regional economic growth. The effects of fiscal decentralization on the financial development and economic growth are different in different regions. Its positive effects are only found in West and Northeast. At the same time the author also thinks over how the factors such financial policies and the degree of denationalization affect the relation of financial development and regional economic growth. At the last there are the conclusions and policy proposes to coordinate regional economic from the aspect of regional finance.