The author believes that a complete market system must include two fundamental aspects:the supply side and the demand side.
The former is mainly involved in increment and structure issues, and price seeking and pricing issues, while the latter is mainly involved in inventory and scale issues, and fairness and competition issues.
Regional government is the main actor on the supply side of a region, while enterprises and individuals are the main actors on the demand side of a region.
Fiscal policy mainly functions on the supply side, while monetary policy mainly on the demand side.
Let′s first analyze objective function, indicator function, and enterprise resource allocation efficiency in terms of enterprise competition. The objective function and the indicator function of enterprise competition is the price determination mechanism and the enterprise competitiveness determination mechanism separately. The key indicators for measuring enterprise resource allocation efficiency in the four stages of economic development include labor productivity in the factor-driven stage, capital productivity in the investment-driven stage, technological progress rate in the innovation-driven stage, and total factor productivity in the wealth-driven stage. The enterprise competitiveness determination mechanism can be demonstrated by the enterprise resource planning (ERP) model.
Let′s move on to objective function, indicator function, and regional resource allocation efficiency in terms of regional government competition. The objective function and the indicator function of regional government competition is the fiscal revenue determination mechanism and the regional competitiveness determination mechanism respectively. The key indicators for measuring regional resource allocation efficiency in the four stages of economic development include industrial competitiveness in the stage of developing industrial economy, investment growth rate in the stage of developing urban economy, contribution rate of technological progress in the stage of developing innovative economy, and the effects of regional government in “9-in-3” Competition in the stage of developing shared economy. The regional competitiveness determination mechanism can be demonstrated by the district resource planning (DRP) model.
The entire process of the regional competitiveness determination mechanism is shown in Figure 0-3.
Figure 0-3? Entire Process of the Regional Competitiveness Determination Mechanism
On this basis, we can study the driving effect of per capita GDP and per capita fiscal revenue growth on regional economic growth and their relationship from the perspective of the objective function, or the influence of variables in regional institutional (policy) innovation on the growth of per capita GDP and per capita fiscal revenue at different stages of economic development from the perspective of the indicator function.
We can complete the DRP model in the following four steps.
(1) The determination mechanism for fiscal surplus and “Nine Factors in Three Categories”.
(2) Comprehensive measure and objective function.
(3) In the case of limited budget, a regional government may maximize the comprehensive measure by adjusting the proportions of three types of fiscal expenditures.
(4) Establish a performance evaluation system for regional government.
After thorough studies, the author′s core viewpoint is that there are dual drives for the market economy to develop. In the four stages of economic development, there are four“combinations” of regional resource allocation efficiency and enterprise resource allocation efficiency. In other words, in the development process of a country′s macroeconomy and market economy, there will be four combinations of mezzoeconomic regional government behavior and microeconomic enterprise behavior. Combination 1: positive regional resource allocation efficiency plus positive enterprise resource allocation efficiency; combination 2:positive regional resource allocation efficiency plus negative enterprise resource allocation efficiency; combination 3: negative regional resource allocation efficiency plus positive enterprise resource allocation efficiency; combination 4: negative regional resource allocation efficiency plus negative enterprise resource allocation efficiency. See Figure 0-4 for details.
Figure 0-4? Four Combinations of Resource Allocation
To achieve the goal of sustainable and high-quality economic development, a country should have positive regional resource allocation efficiency plus positive enterprise resource allocation efficiency. That is to say, the country should allow the market to determine resource allocation and better leverage the dual drives of regional government and enterprise.
Based on the foregoing, the following conclusions can be drawn:
(1) regional government is the market entity of mezzoeconomy;
(2) there are dual entities of market economy;
(3) regional government competition and enterprise competition are correlated on one hand and different in essence on the other hand;
(4) an effective government should achieve scientific foresighted leading;
(5) coordinated macro, mezzo and microeconomic activities are required by a country′s economic growth;
(6) the economic growth of countries around the world requires a new engine.