Fiscal decentralization and government competition impact on house price: based on empirical study with provincial panel data

Abstract

Fiscal decentralization has brought many aspects of influence to China's economy,in this context,this paper discussed the relationship among fiscal decentralization,the government relationship and house price. First,we discussed house price determination mechanism under the partial equilibrium framework. Theoretical models show that house price depends on the degree of fiscal decentralization,the costs of construction investment,consumers' disposable income and so on. Then,by using the panel data of house price and the economic fundamentals of 30 provinces in China from 1999 to 2011,empirical studies show that fiscal decentralization and local government competition play a significant role in increasing house price,but the role exhibited different influence in different regions. In our opinions,to decrease the speed of house price growth,reducing the intensity of current fiscal decentralism appropriately and the incentives of local government land finance,promoting the reform of property tax which estate property acts as the core and transforming local government functions should be carried out.