Research On Fiscal Impacts Of Province-Directly-Managing-County Fiscal System Reform At County Level

The development at the county level is very vital to the country's future.The county plays a fundamental role in the country's economic growth and public services supply.Ensuring the county's financial stability is the necessary precondition to maintain social harmony and residents' happiness.However,in practice,due to the five-level fiscal system in our country,the county often confronts a very difficult situation under the restriction from the upper levels.The interests' competition and resources grabbing further exacerbate the county's fiscal capacity.To reverse the fiscal difficulties,the country put forward the Province-Directly-Managing-County fiscal system reform.The reform aims to enhance the efficiency of resource delivery and avoid "city-grabbing-county" and thereby improve the county's fiscal capacity through reducing the city level and delivering the funds from the province directly to the county.Under the promotion of the central government,many provinces have actively launched the reform since 2004.By the end of 2013,the reform pilots have covered more than 60%of all counties in 23 provinces.The reform develops in a fast speed and in a huge scale.However,it is lack of scientific and systematic evaluation whether the reform achieved the expected targets.Though many scholars conducted large numbers of researches on this topic,it is far from enough to evaluate the reform's impacts considering the fiscal game relations among the province,the city and the county.It is also scarce to measure the reform's impacts on the basis of different kinds of pilots all over the country.Therefore,based on the county-level panel data of 31 provinces(or autonomous regions)from 2000 to 2013,this paper will firstly make clear the fiscal relations of province-city-county and the policy considerations of pilot selection,and then examine the impacts of the reform on the fiscal capacity,fiscal decentralization,fiscal disparity,fund allocation at the county level.It is expected that this paper could theoretically contribute to deepening the reform.Our research is conducted from multiple perspectives,such as policy interpretation,theoretical prediction,practical analysis and econometric estimation.According to our research,some conclusions are drawn:(1)The fiscal relations among the province,the city and the county,and also policy considerations of pilot selection,have influence on the implementation of the reform.It is found that in the fiscal relations,stronger city and weaker county in fiscal capacity has more possibilities to be chosen as the reform pilots.In addition,the county with larger population and lower respective city fiscal capacity is more likely to be reformed.Besides,stronger provincial fiscal capacity and smaller provincial jurisdiction is helpful to carry out the reform.(2)The reform improves the county's total fiscal revenue capacity.Especially,in the county with larger agricultural share and in the county belonging to stronger city and weaker county,the improvement is more obvious.However,through the research of the revenue structure and the dynamic trend,we found that the improvement of county's total fiscal revenue capacity is achieved by the increasing transfer payment.The county's own revenue level does not change significantly.It means that the reform just boosts the total number of fiscal funds by "blood transfusion" but it does not achieve "hematopoietic".(3)The reform amplifies the degree of fiscal expenditure decentralization and reduces the degree of fiscal self-financing,but has little impact on fiscal revenue decentralization.Especially,in the county with larger agricultural share and larger population,the degree of fiscal self-financing decreases more.(4)The reform widens the gap of the own fiscal disparity among counties.Nevertheless,after adding the transfer payment,the total fiscal disparity could stay within a reasonable range.(5)After the reform,in terms of the county's expenditure,more funds are invested into the field of construction,whereas the people's livelihood spending and administrative spending decrease.In general,the reform does not enhance the county's own fiscal revenue capacity or the county's fiscal decision power.Also,the reform exacerbates the non-equalization development among counties,and shows the structural imbalanc problem of "value construction and ignore people's livelihood".The sustainability of the reform is questionable.To address these issues,this paper comes up with a series of policy recommendations,including:(1)making standard pilot selection criteria,and improving the legal and institutional construction;(2)constructing reasonable incentive and restraint mechanisms,and enriching the ways of assisting the undeveloped counties;(3)implementing simultaneously "reinforcing county's fiscal rights for its prosperity",and thus increasing the degree of county's fiscal revenue decentralization;(4)encouraging the cooperation among counties,and thus promoting the equalization development;(5)strengthening the supervision of county's fiscal funds,and refining the official's promotion evaluation mechanism.