A Theory Towards the Selective Public Goods Provision Behavior of China’s Local Government

Abstract

This paper investigates the selective public goods provision behavior of China’s local government and its effects. Theoretic models of dominative local officials are constructed to understand public goods provision, which is compared with the residents’ as well as sectors’ demand for public goods. The results show that, the official rents diverts local governments’ provision of public goods away from the real demand of residents and results in the coexistence of under-provision and over-provision of public goods; non-agricultural biased public expenditure also results from the self interest of local officials who try to balance between political promotion and social stability; the mismatch of rural public goods between its supply and its demand is due to the conflict between the political mechanism of public goods supply and the economic efficient rule of public goods demand.