TITLE:
An Empirical Analysis of Fiscal Decentralization on Public Goods Spending
AUTHORS:
Yongtao Li, Jiguang Zheng
KEYWORDS:
Fiscal Decentralization, Public Goods Spending
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.3,
March
31,
2017
ABSTRACT: China has achieved a rapid economy growth for nearly forty years since the reform
and opening-up policy in 1978, and the overall living standard of Chinese
residents has also improved significantly. In reality, economic transition includes
a series of processes, not only related to the market and business, but also involves
with the government’s change. The
traditional theory of decentralization mainly argues it can make better for
subordinate governments to ensure that the public goods they provided match
with local residents’ preferences and to promote the efficiency of local public
services delivery. This paper essentially uses a year-county dual fixed effects model to test the impact of
fiscal decentralization on the spending of public goods at county-level. Our
analysis finds fiscal decentralization has a significant positive impact on the
spending of residents’ livelihood other than the investment in infrastructure.
In particular, the county government prefers the projects closely related to
public goods expenditure of local residents to the projects that have a larger
spillover effect.