Determinants of the Allocation of Intergovernmental Grants in Taiwan

• Main Authors: Hsiao-Ling Chen, 陳曉鈴
• Other Authors: Chih-Chin Ho
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/97030987626841796252

碩士 === 國立臺灣大學 === 經濟學研究所 === 95 === Many counties and cities have met with financial shortage for a long time in Taiwan. The general public’s fiscal illusion, the excess dependency for public goods and the politicians’ excess promises to voters have all contributed to increased local spending. To remedy the issue, the central government began implementing several measures since 1998 that included the simplification of the government bureaucracy, expansion of central fiscal planning process that weighted in local tax revenues and fair allocation of resources according to pre-set formulas. Despite all effort, local governments continue to operate in unprecedented deficits. They incessantly look to the central government for relief, not to mention becoming self reliant. This analysis will closely examine the substantial determinants that affect the allocation of grants to the local governments to address the questions of equity and efficiency. Or, is the process impeded by election votes, congressional influences and the lobbying efforts of local government? The samples are taken from 21 counties/cities between 1993 and 2004 by means of panel data. The empirical results of OLS without Group Dummy Variables regression model are as follow： 1. Fiscal Need and Capability Per capita grant is negatively affected by local government’s revenue/spending ratio, per-capita income and the 1999 fiscal policy, but positively affected by elderly population ratio, previous per capita grant and 2001 fiscal policy. 2. Spillover Effect Crime rate has positive impact on the per capita grant, whereas the impact is insignificant in urbanization and the percentage of county’s/city’s students. 3. The lobbying costs of local government and other political variables Commute time increases lobbying costs, and thus reduces the per capita grant. The partisanship of magistrate/mayor, the number of legislators and whether or not it was in the election year did not have a significant effect on per capita grant. In conclusion, the per capita grant is helpful in equalizing horizontal fiscal capability among counties and cities. Spillover effects and other political variables, excluding the local lobbying costs, are not sufficient to explain the design of these transfers. However, political factors should not be ignored in the process.