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Research on the Fairness and Efficiency of the Allocation of Financial Resources
Time:2013-04-15 14:13:04   Clicks:

The first-order problems about the fairness and efficiency of the allocation of financial resources are whether the overall tax burden level lies in the optimal range, and whether the tax type and tax system hurt the economic growth. The second-order problems are whether the expenditure structure, especially the transfer payments of financial resources, is in line with the principles of justice under the conditions at a given tax burden level, as well as the efficiency of fiscal spending, in particular the proportion of general administrative expenses.

The Unirule Institute of Economics will conduct a research on the fairness and efficiency of the allocation of financial resources, focusing on the above mentioned second-order problems. Allocating financial resources, as commonly used in the world, is a way to achieve fairness in a society. Two ways of intervention can be adopted: direct intervention and indirect intervention. Through direct intervention, financial resources are directly allocated to individuals in order to adjust personal income distribution, e.g. pensions and social assistance fees, rural relief fees and social insurance fund expenditures in China's fiscal expenditure projects. By indirect intervention, the government increases the expenditure in agriculture, infrastructure, culture, education, science and healthcare. This research focuses on the fairness of the allocation of financial resources. Moreover, the study will pay attention to the transfer payments of financial resources, and whether the transfer payments are in accord with Rawls's Second Principle of Justice, i.e. the transfer payments can be slightly leaned towards the poorest people when violating the First Principle of Justice. The allocation of financial resources also encounters efficiency problems. China's general administrative expenditures are above the world average. There are problems with loss and waste of public financial resources (about a trillion Renminbi a year). For the efficiency issues of the allocation of financial resources, this research will analyze the change of proportion of administrative costs (plus other related costs, such as public healthcare costs of government officials and housing subsidies costs) and fiscal revenue and expenditure. The reform of the fiscal system is one of the core issues in China. This research selects the fairness and efficiency of allocation of financial resources instead of a comprehensive study of the fiscal and taxation system, in order to make a preliminary assessment of the allocation of financial resources in China.

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