Vertical fiscal imbalance, transfer payments, and fiscal sustainability of local governments in China

Li, Tianyu; Du, Tao

doi:10.1016/j.iref.2021.03.019

Cited by 56 publications

(35 citation statements)

References 23 publications

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“…Furthermore, it has been shown that VFIs significantly inhibit local governments’ tax efforts when accompanied by a reduction in their revenue power (Jia et al 2021 ). This is detrimental to local government fiscal sustainability (Li and Du 2021 ). From the perspective of industrial development, VFIs hinder industrial structure upgrading (Lin and Zhou 2021b ).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

How do vertical fiscal imbalances affect energy efficiency? The role of government spending on science and technology

Feng

Liu²,

2023

Environ Sci Pollut Res

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How to improve energy efficiency is a practical issue of common concern around the world. In China, vertical fiscal imbalances (VFIs) generated under the existing fiscal system may have a significant impact on energy efficiency through government spending on science and technology (S&T). However, this potential relationship has not been explored in the literature. In this work, we aim to address this gap. Using Chinese provincial panel data from 2001 to 2017, this study empirically examines the relationship between VFIs and energy efficiency through a mediation model. The results show that VFIs greatly suppress energy efficiency. We further find that VFIs indirectly affect energy efficiency by reducing government spending on S&T. The results show significant regional heterogeneity. The intermediary role of government S&T expenditure is more significant in inland areas than in coastal areas. Therefore, to improve energy efficiency and achieve sustainable development, the Chinese government should focus on innovative reform of the existing fiscal system and reduce VFIs. In addition, the government should focus on fiscal spending in the field of S&T to promote technological innovation to guarantee the improvement of energy efficiency. Inland areas should pay particular attention to this issue.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

How do vertical fiscal imbalances affect energy efficiency? The role of government spending on science and technology

Feng

Liu²,

2023

Environ Sci Pollut Res

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“…Fiscal Imbalance (FI): The essence of FI aims to quantify the disparity under the fiscal decentralization system, the relationship between local fiscal revenue and spending, representing the federal and state governments' fiscal ties. Referring to Li and Du (2021), the procedure for calculating FI is fiscal revenue decentralization/fiscal expenditure decentralization. As a result, this paper estimated FI from the standpoint of a decentralization system.…”

Section: Dependent Variablementioning

confidence: 99%

“…Local governments began to compete for resources to meet the goal in the short run. In China's GDP-oriented appraisal system, local governments often spend money on infrastructure and investment to achieve economic growth requirements (Li and Du, 2021).…”

Section: Introductionmentioning

confidence: 99%

A study on the impact of fiscal decentralization on carbon emissions with U-shape and regulatory effect

Xia

Zhan

et al. 2022

Front. Environ. Sci.

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The Chinese government set a goal in 2009 to cut carbon emissions by 40–45 percent of 2005 GDP per unit by 2020. The role of fiscal decentralization reform in strengthening environmental governance has gained importance. This paper explored the impact of fiscal decentralization reform from 2010 to 2019 on carbon dioxide emissions in China. We utilized the first-order differential dynamic panel econometrics model to examine the correlation between fiscal decentralization and carbon dioxide emission under fiscal imbalance and transfer indirect effects. The findings revealed that 1) fiscal imbalance reduced CO2 emissions due to the decentralization of revenue, and expenditure asymmetry undermined CO2 emissions control. 2) The central government’s transfer payments offset the negative consequences of a fiscal imbalance. The fiscal decentralization of the government caused a difference between regional income and expenditures in the budget. However, it could affect local government expenditure on carbon emission control through central transfer payments, which could restrain carbon emissions and control environmental pollution. 3) The impact of fiscal decentralization on carbon dioxide emissions was influenced by the industrial structure with the U-Shape effect. This was because the adjustment of the industrial structure was cross-term. In the early stage of the industrial structure adjustment, there was a significant decline in coal consumption demand and carbon emissions reduced. However, as the proportion of the secondary industry increased, there was a significant positive correlation between the secondary sector and carbon dioxide emissions in China. Our findings have important policy implications. First, while the promotion of Chinese officials is based on local GDP performance, locals may introduce green GDP as the criterion for rating governments’ performance. Second, local governments should improve environmental governance by increasing technical, environmental protection, and innovation investment. All in all, the findings provide a theoretical basis for relevant research and policy suggestions for China.

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“…Besides, local officials should effectively play the optimal implementation effect of public transfer policies. On the one hand, public transfer payments policy should not only bring financial incentive effect to local governments, but also guide the behavior of local government public sector and encourage them to increase the supply in health-related deprived rural households [ 66 ]; On the other hand, public transfer policy should focus on the difference in the degree of rural households’ demand for health care, and enhance the targeting of public transfer mechanism in the supply and demand of health care services. In this way, we can effectively improve the health care vulnerability poverty of rural households and improve people’s quality of life.…”

Section: Discussionmentioning

confidence: 99%

Assessing the impact of public transfer payments on the vulnerability of rural households to healthcare poverty in China

Huang

2022

BMC Health Serv Res

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Background China completed the task of eliminating absolute poverty, following the 18th National Congress. However, after 2020, rural poverty in China has entered a new stage that is characterised by transformational secondary poverty and relative poverty; thus, the poverty vulnerable group is the new target group. Public transfer payments play a vital role in reducing the vulnerability of rural households to healthcare poverty. Assessing the effectiveness of public transfer payments in rural households can improve the vulnerability of rural households to healthcare poverty. Methods In total, 5754 rural households were included each year, which accounted for a total of 16,722 rural households during the three-year study period. The multidimensional poverty and the vulnerability to healthcare poverty of rural households were assessed and compared. Two series of multivariate logistic regression models were further used to assess the effects of public transfer payments on improving the vulnerability of rural households to healthcare poverty. Results When the poverty line was set at $1.90 and $3.20, rural households in all the three study years exhibited a higher vulnerability to healthcare poverty than the actual incidence of multidimensional poverty in healthcare, and the Eastern regions exhibited higher vulnerability to poverty than the Western regions of China. The series of multivariate logistic models employed to evaluate the effects of public transfer payments on the rural households’ vulnerability to healthcare poverty indicated that considering the differences in rural households’ demands for healthcare is vital for the government to fulfill the effects of public transfer payments. When income elasticity indicators for health care needs were included, the effect of public transfer payments on improving the vulnerability of rural households changed from less significant in 2014 and 2016. In 2018, however, the effect of public transfers on improving the vulnerability of rural households has increased compared to the non-inclusion elasticity. Conclusions The imbalance of development between urban and rural areas in China is increasing, and rural households with heavy economic burdens are facing the risk of low healthcare services. Our findings highlight the importance of government departments in improving public transfer payments to reduce rural households’ vulnerability to healthcare poverty.

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Vertical fiscal imbalance, transfer payments, and fiscal sustainability of local governments in China

Cited by 56 publications

References 23 publications

How do vertical fiscal imbalances affect energy efficiency? The role of government spending on science and technology

How do vertical fiscal imbalances affect energy efficiency? The role of government spending on science and technology

A study on the impact of fiscal decentralization on carbon emissions with U-shape and regulatory effect

Assessing the impact of public transfer payments on the vulnerability of rural households to healthcare poverty in China

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