Impact of Chinese-Style Fiscal Decentralization on Urban–Rural Integration: Based on Factor Allocation

Abstract

The urban–rural relationship has been a critical issue in studies on urban and rural geography. Urban–rural integration development (URI), as an integral part of the urban–rural relationship, needs to be understood under an integrated theoretical framework. Based on the conceptual analysis from productivism to post-productivism, this study constructs a multidimensional framework to understand urban–rural integration, restructuring from five layers that integrate population, space, economic, social, and environmental concerns, and the revised dynamic coordination coupling degree (CCD) model is used to measure the level of URI. Many studies have focused on the connection between URI and factor allocation. However, it is yet to be determined how both fiscal decentralization and factor allocation are linked with URI. This study focuses on this unexplored topic, and the impact mechanism among URI, factor allocation, and Chinese-style fiscal decentralization is investigated by adopting spatial econometric models, for achieving the high-quality development of China’s urban–rural relations. Empirical analysis of China’s three major urban agglomerations reveals that there are promising signs in China’s urban–rural integration development, with an orderly and coordinated structure shaping over the period 2003–2017. The rationality of factor allocation depends heavily on the power comparison between the helping hand and the grabbing hand of local governments under Chinese-style fiscal decentralization. Moderate fiscal decentralization, with a perfect market and social security system, leads to the free flow of factors and promotes urban–rural integration. By contrast, excessive fiscal decentralization causes resource misallocation and hinders urban–rural integration development. In light of our empirical evidence, the coordinated development of small- and medium-sized cities and subcities in urban agglomerations is suggested, it is highly necessary to establish a perfect social and employment security system. In addition, a reasonable space planning system for land use needs to be constructed by China’s governments at all levels. Chinese local governments should pay more attention to rural development in their jurisdiction by stimulating their information advantages under Chinese-style fiscal decentralization.

What are the stumbling blocks to shared prosperity in China

“…The impact of fiscal decentralization on income inequality is uncertain. A local government can narrow the gap with other provinces by regulating tax revenues (Digdowiseiso, 2022), but may also increase the urban-rural gap due to resource allocation imbalances (Zhou and Yang, 2023). Transfer payments from the central government to local governments and social security payments to retired workers are both policies related to reducing income disparities (Lei et al, 2016;Yu and Li, 2021).…”

The Influence of Rule of Law on Government’s Sustainable Economic Management: Evidence from China

“…From the single function of resource allocation supplemented by the function of supervision, control, and system suppliers in the socialist market economy, China's fiscal operations are becoming more and more extensive [79]. Democracy and the rule of law are some of the connotations of public fiscal functions; excessive fiscal decentralization causes resource misallocation [80]. The basic principles for determining fiscal functions are fiscal responsibility (i.e., what to do) and fiscal roles (i.e., how to achieve the goal of government management).…”