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《Research of Institutional Economics》 2007-04
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On Cost-Benefit and Transaction Cost of Decentralization between the Central Government and Local Governments:Law and Economics Perspective

Zhenghua Chen (School of Humanity and law,Tian Jin Polytechnic University,300384)  
Rational choice is the hardcore paradigm of Law and Economics.It means that the benefit (utility) equals to the remaining sum that income subtrac- ted from cost.In decentralization issue,the institutional design and arrangement should pursue both the maximization and minimization inevitably,in order to real- ize the maximization of benefit in decentralization.The legal institution regulating decentralization should urge the minimization of transaction cost in decentralization and cost of public goods simultaneity,in order to promote the efficiency and opti- mization of decentralization.Two factors must be considered:the transaction cost of institution in decentralization and the cost and income of observation or trans- gressing the law.At present,the cost of negotiation,execution and supervision in decentralization institution are exorbitant.As a solution,the rent-seeking opportu- nities of local governments should be eliminated,and the supervision of National and local People's Congress should be enhanced,the organizations and supers in central government and local governments should be reduced,the supervising effi- ciency of central government and local People's Congresses to the local governments should be promoted.
【Fund】: 国家社会科学基金资助项目(05BMZ007号)的前期成果之一
【CateGory Index】: D90-05;F014
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