Incentive Effect of Special Transfer Payment on Local Government Agricultural Expenditure An Incentive-response Model

In 1994, China implemented a major tax reform aimed at ensuring a stable budget for both central and local governments, laying a solid foundation for the country's sustainable development. In order to stimulate local governments' investment enthusiasm in key economic areas, especially in agriculture, the central government has carefully planned a series of special transfer payment policies. These policies not only provide the necessary financial support for local governments, but also set clear conditions for local governments to ensure the corresponding expenditure of local budgets before obtaining specific transfer payments. This special transfer payment system has played an important role in promoting China's rapid economic growth. In order to deeply understand the effect of this system, this paper constructs an incentive response theoretical model to deeply analyze the response mechanism of local governments to special transfer payments. The results of the model show that only when the amount of special transfer payments exceeds a certain threshold can local governments effectively stimulate their spending behavior. In addition, this incentive effect is particularly evident in areas with relatively backward economies.