The Fiscal Sustainability of Local Governments: the Evidence from Taiwan

• Main Authors: Liu, Pin-Jou, 劉品柔
• Other Authors: Lin, Kung-Cheng
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/86558383781127818128

碩士 === 國立臺北大學 === 財政學系 === 102 === In order to have well economic development, the local governments need to have healthy fiscal condition. However, the deficit and debt of Taiwan’s local government increase sharply in recent years. Further, due to lack of study in field of local fiscal sustainability in Taiwan, the puspose of this study is to test the fiscal sustainability of Taiwan local government. The focus will then examine how the fiscal equalizing policy of central government and political factors affect the local fiscal performance. The policy implication of fiscal condition of Taiwan local government will be discussed finally. Based on the empirical model of Bohn (2005), we evaluate the impact of debt-to-total income ratio on primary surplus-to-total income ratio in Taiwan’s local governents. The data of Taiwan’s 23 counties/cities from 1998 to 2012 are used to perform the single root test, cointegration test, vector autoregression analysis, and fixed effects model analysis. The empirical results show the effect of debt-to-total income ratio on primary surplus-to-total income ratio in Taiwan local governents is negative, which means that the local governments in Taiwan are not fiscal sustainable. Further results are follows. First, in the fixed effect model, the local government fiscal unsustainability rises if the grants and Centrally-Distributed Tax Revenues (G&CDT) are included. This shows the included G&CDT will deteriorate the local fiscal sustainability further under the consideration of regional differentiation. Second, in the consideration of regional and time differentiation, the fiscal unsustainability of local government will become more worsen if G&CDT are not included. This implies that the fiscal condition of local government is not sustainable even more without the inclusion of G&CDT. Third, the larger local government spending is, then the less budget surplus-to-total income ratio is. Forth, if local major and majority party of local council belong to same party, the ratio of budget surplus-to-total income becomes less. This might refer to the reasons of easy pass of budget auditing and ineffective performance of budget. Finally, the budget surplus ratio increases when local authority and central president are in the same party. This might be due to the most majors in the northern part of Taiwan and the President belonging to same party and the fiscal conditions of these counties/cities are relatively well. Or it might be the reason that the local governments get more resource if their majors are the same party wity the President. The implication of this study is that the local governments in Taiwan should really put more efforts in increasing revenues and spending more effectively. Furthermore, the reliance of grants and Centrally-Distributed Tax Revenues would make the fiscal conditions of local governments in Taiwan even more deterioratedly.