Abstract: Deepening the reform of the financial system is an important focus to promote the high-quality economic development, and improving regional innovation efficiency is a strong driving force to promote the high-quality economic development. Therefore, under the background of high-quality economic development in the new era, this paper explores the issue of regional innovation efficiency from the new perspective of vertical fiscal imbalance. Based on China's provincial panel data from 1998 to 2018, this paper empirically analyzes the impact of vertical fiscal imbalance on the regional innovation efficiency and its mechanism. The results show that the vertical fiscal imbalance can significantly inhibit the improvement of regional innovation efficiency, which leads to the loss of regional innovation efficiency. The results of mechanism analysis show that“competition for growth”between local governments has strengthened the negative impact of vertical fiscal imbalance on regional innovation efficiency, while“competition for innovation”has weakened the negative impact of vertical fiscal imbalance on regional innovation efficiency. Therefore, it is necessary to correct the mismatch between the fiscal power and the administrative power of local governments, standardize the competition behaviors among local governments, improve the political assessment system of local officials and other measures, so as to appropriately reduce the degree of vertical fiscal imbalance, guide local governments to change from“competition for growth”to“competition for innovation”, and promote the improvement of regional innovation efficiency.

Key words: vertical fiscal imbalance, local government competition, regional innovation efficiency, intergovernmental fiscal relations