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Theoretical basis and feasibility study of Local Government Bonds

Author: Anonymous From: www.yourpaper.net Posted: 2007-11-20 15:20:55 Read:
Theoretical basis of local bonds.

1. Theory of public goods
Public goods are pure public goods and mixed public goods, pure public goods must have three characteristics: the indivisibility of the utility, the consumption of non-competitive and non-exclusive benefit. The typical pure public defense. But most public only has a limited number of non-competitive or non-exclusive limited the range between pure public goods and private goods, and thus can only be called a hybrid of public goods. Such as education, government-built park, crowded highways belong to a mixed public goods. In theory, the supply of pure public goods, government finances should be in full burden, can not rely on market mechanisms to solve mixed public goods supply, you should take the principles of government and market sharing. Therefore, regardless of pure public goods supply or mixed public goods supply, the government has a responsibility commitments.
Consider the expenditure of government departments of public goods. Government sector spending can be divided into recurrent expenditures and capital expenditures, government spending in a certain period, the recurrent expenditure directly form the social consumer interests, the interests of capital expenditures not directly occur in the same year, but number of years in the future at the same time play a role. According to this division, the majority of government spending on public goods belonging to capital expenditures, such as government-built roads, libraries, and other mixed public goods as well as pure public defense, lighting products, they will be after a long period of being the interests of the society as a whole, its construction costs can not all be treated as the cost of a year to provide public goods, but should be apportioned to the next income year. Recurrent expenditure would constitute only a part of pure public goods, such as the government must pay to the wages of government employees, these expenditures directly formed when the cost of public goods, and it is directly related to the public service interests of society by the year.
Government fiscal funds obtained through the collection of taxes and debt funds obtained through debt to pay for the expenditure of public goods. Beneficiaries and the cost burden is consistent with the public goods provided by the taxes, the provision of public goods; debt funds obtained by borrowing to put the public benefit and cost burden is divided into two distinct periods, so that the beneficiaries and cost burden may become inconsistent, because the members of the society is now free to enjoy the benefits of public goods, and the future members of society will have to bear the cost of the supply of public goods. Therefore, the recurrent expenditure of government departments by taxes and other fiscal funding commitments to borrow income to bear the recurrent expenditure of the year, means that let the people free of charge to enjoy the public interests, and let the people responsible for the repayment in the future the responsibility of the debt. In this case, the public benefit and the cost borne by the main points of debt financing to make the scale of public goods provision exceeds provides efficient level, difficult to achieve the goal of efficient allocation of the provision of public goods. Not to raise taxes and other financial funds for government capital expenditure as the only channel to provide the level of debt financing costs to future benefit period, will contribute to the social choice to meet the efficiency requirements of the public . Because if I had to bear all capital expenditure taxes and other financial funds means people now bear the full cost of public goods, and later let free to enjoy the benefits it produces, from the point of view of the allocation of resources, This will make the provision of public goods scale below the effective level. On the other hand, although the public capital expenditure by project revenue to make up for the cost, but after a number of project revenue generated in revenue before the formation of the cost of the supply of public goods should remain debt income to make up for, and to be generated by the project income before charges or taxes to repay debt.
So it can be concluded the recurrent expenditure of government departments by taxes and other fiscal financial support, and capital expenditures by the majority of the debt funding support is in line with the efficiency requirements. Government are all pure public goods spending and spending on the part of the mix of public capital expenditure, the government of a considerable part of public expenditures, debt raising debt capital to support.
Fiscal decentralization local bond theory
Point of view, from the level different income breadth and range of public goods, thus it points in the national and regional public goods. Benefit limit the scope of public goods within a specific area, belongs to the regional public goods (also known as local public goods), if the range of benefits across the region, is a national public goods. In theory, the central government can also provide regional public goods. Residents between the different areas of regional public goods preferences, however, are usually different, and therefore the demand is also different in a better position in local government to understand the preferences of local residents, which will help local governments better implementation of local economic policy and the provision of regional public goods. In contrast, the central government is almost impossible from a tax effectively combined with the region's interests, so it is likely to cause public product preferences and the difference between the actual benefit of residents of a certain area, may even differ materially. It is the presence of regional public goods, before the fiscal decentralization has become a necessity.
Local governments to provide regional public goods model with a general theory of public goods is basically the same (as described earlier). However, in liquidity exists population and factors of production in the case, the local governments to provide public goods will be restricted. According to model Ti Bute (tiebout), each local government provided different kinds of public goods, the residents, where products are best suited to its demand preference, he would choose to go to a place to live. "To enough to vote, residents showed that consumer preferences for certain public goods, thereby stimulating the efforts of the local government to provide public goods suitable for local residents prefer. There are the residents of the "foot voting", the local government is difficult taxed through taxes on mobile factors, thus weakening the taxability of the local resources and local governments the ability to tax and lower levels of local government, especially In fact, this is also a low-level local government property taxes as the tax basis is an important reason. Similarly, in the local government to provide local public goods, financing through tax not only contrary to the "benefit principle", the benefit and burden of the cost of separation, the residents now bear the cost of future residents will make residents through regional mobile express their dissatisfaction, the results can not be effective provision of public goods. Spending by borrowing to avoid the emergence of such side effects, this theory of fiscal decentralization under the Local Government Bonds.
Second, the issue of several problems at the local bonds
Issuance of local bonds must also address several important issues:
1. Issue local bonds, what is the purpose?
Because now there are a large number of hidden local financial deficit through the issuance of local bonds seems to be a logical solution to this problem, but in fact this is not feasible. Local fiscal deficits exist many reasons, both financial debt over another heavy financial burden resulting from the backorder expenses unpaid debts and other problems. No doubt as an acknowledgment of these problems with local government bonds to cover the deficit, this can not solve the problem of local fiscal expenditure structure is irrational and the functions of the local government is not in place, but will lead to debt repayment crisis, bond funds can not gain Therefore, it is undesirable. In fact, the purpose of the issuance of local bonds mainly to regulate the local revenue system, provide a financial compensation mechanism for local governments to continue to bear the corresponding functions, on the one hand, the public goods necessary for economic development, on the other hand bond funds paid normative solve the soft budget constraints of local governments reduce their excessive intervention in the market, to enhance the effectiveness of economic construction spending.
Local government bonds issued by the possibility to reduce the pressure on the debt of the central government?
In fact, government bonds issued by the central government, local government took the issue part of the debt. In general, the central government issued government bonds should be used for the national economic spillover large infrastructure construction projects, already use part of the funds the project has regional Central on behalf of the issuance of local bonds. Since this part of the funds used for the provision of local public goods, of course, by the local government should issue bonds to raise more reasonable from this perspective, the issuance of local bonds can indeed reduce the debt of the central government pressure. But if you take into account the presence of the local financial risk, the issue becomes more complicated, and specifically discusses the issues raised in the fourth following.
Local Government Bond Can be used to support backward areas, whether it can be used for large-scale development of the western region?
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