Author(s): XIE Hong-tao, MEI Jian-ming, School of Public Finance and Taxation of Zhongnan University of Economics and Law
Pages: 151-163
Year: 2014 Issue:  7
Journal: Economic Management
Keyword:  fiscal governance; public participation; efficiency of public expenditure; dynamic malmquist index;
Abstract: This paper begins with a review of such related theories of public participation in government behavior of public spending and the Chinese practice as public governance theory,proposing three hypotheses.Then,this paper analyzes the impact of Internet and that of the traditional media on local government public spending based on such data as the number of Internet users or newspapers and media collected from different provinces.Thirdly,this paper compares the influence of Internet and that of NGOs on government spending efficiency,and further discusses the complementary and alternative relations among different forms of public participations.This paper adopts a new approach that is rarely seen in the previous researches.The approach can be described by three points.First,dynamic Malmquist Index is applied to revise the accumulated multi-period problems related to the public goods,thus finding out the breakpoint of public spending in 2003.Second,counterfactual analysis and IV Panel Tobit are adopted to verify the different effects of different forms of public participations on public spending with a conclusion that Internet finally makes a crucial influence on public decision-making by promoting the establishment of a civil society through feedback and public opinion.Third,this paper observes a complementary relationship between variations of internal system of government performance assessment and public participation in terms of influence on policy making on public spending of local governments.It can be found from the cumulative efficiency scores of Malmquist Index illustrated below that:(1) in the early 1980 s,the efficiency of fiscal spending of provinces(municipalities) maintained in a high level,which might have relation to the public spending level and total social public goods.In other words,less fiscal spending ensures more public goods supply.(2) From 1994 to about 2003,fiscal expenditure efficiency of provinces(municipalities)presented a clear downward trend.This trend was greatly different from calculations of Zhang and Chen Shih(2008),it only calculated efficiency scores on the relatively efficient frontier of the current period,which was incomparable in terms of periods.(3) after 2003,the general fiscal expenditure efficiency saw a rapid increase,but there were differentials among the trends of East,central and west provinces.For example,efficiency scores of west provinces such as Shanxi,Inner Mongolia,Guizhou,Shaanxi continued to decline after 2003;efficiency scores of central provinces such as Henan,Hubei were flat;while scores of the east provinces such as Zhejiang,Shandong were on the rise.However,there were also differentials among central provinces as we can see that the efficiency of fiscal spending in Hunan Province improved obviously more than that in Henan Province.However,this clustering effect is not entirely related to the level of economic development.Regression analysis and counterfactual analysis with Panel Tobit method verify the three hypotheses mentioned above.(1) There is a complementary relationship between decentralization and public participation which accounts for the improvement in public expenditure efficiency of local governments after 2003.(2) Public debate and pubhc project evaluation make way for the establishment of a civil society(social capital) and bidirectional information exchanges,with the Internet as the main channel,are an effective way of public participation.(3) The formation of general civil society is a prerequisite for social organizations such as the NGOs to play a role and NGOs and public direct engagement are complementary to each other in terms of government fiscal policy-making.Fiscal decentralization is the first step to improve government efficiency.It’ s proved by the empirical analysis that financial transparency brought about by public scrutiny,public participation and pressure of public opinions has exerted further influence upon the local government to improve the efficiency of public decision-making.This argument has been supported in the conclusion by by Bardhan(2002,2006)and Fu Yong(2010).As it’ s pointed out(Bardhan,2006) deficiencies in the supervision system due to fiscal decentralization in developing countries led to corruption and interest groups penetrating intervention in the local government which may result in a deviation of financial expenditure from the public welfare;extensive public participation may be one of the solutions to those problems.