Issues on Moral Hazards in the Operation of Local Public Finance in China

Abstract

During the reform of fiscal decentralization in our country,local governments turn to relatively independent public sector gradually.In our existing institutional arrangements,as the implicit guarantees taken by central government suffer from the problem of incentive incompatibility,the resulting moral hazards will lead to even higher fiscal risks.On the precaution of moral hazards in local governments,we should set up risk-control mechanism and perfect the existing fiscal system.