Research On The Impact Of Sub-provincial Fiscal Decentralization On Basic Public Service

Intergovernmental relation is an important part of fiscal system,and sub-provincial fiscal decentralization is crucial in intergovernmental relations.How to stimulate the enthusiasm of sub-provincial governments,especially gras s-roots governments by reasonably arranging inter-governmental relations is not only an essential issue that central government needs to be concerned but also a difficult problem faced by provincial governments under the national system of political centralization and economic decentralization in China.The core content of intergovernmental relations is tax assignment,especially the tax distribution of governments below provincial level under the Tax Sharing System.Reasonable revenue distribution can not only provide sufficient financial resources to municipal and county governments but also stimulate the enthusiasm of sub-provincial governments to fulfill their responsibilities.Sub-provincial fiscal decentralization not only profoundly affects the behavior of sub-provincial governments but also on their performance of basic public services responsibilities.Under the decentralization model,the allocation of financial resources is an external manifestation of competition among sub-provincial governments under the baton of "official performance evaluation".Once they were in the competition,there is no doubt that sub-provincial governments will engage in developing economy and increasing fiscal revenue under the incentive of fiscal decentralization and promotion model,while neglect the construction of basic public service system.The deviation of productive expenditure distorts the fiscal expenditure structure of sub-provincial governments,which is not conducive to the development of basic public services.More importantly,the fiscal expenditure bias of local governments is not static.As the extent of fiscal decentralization continues to rise,the fiscal expenditure bias and emphasis on basic public services of sub-provincial governments is changing too.The differentiation of basic public services between different regions is not conducive to the improvement of regional equalization of basic public services.Sub-provincial governments’ competition for growth has overlooked the needs of residents in basic public service systems,which has led to an increasingly severe imbalance between the supply and demand of basic public services.At present,most of the existing literature studies the level of basic public services and the equalization of basic public services from provincial perspective,such as central and provincial fiscal decentralization and transfer payment,while research focusing on the relationship between sub-provincial fiscal decentralization and basic public services is relatively insufficient.In fact,the supply agents of basic public services are usually prefecture-level municipal and county governments,and provincial governments play an important role in basic public service management.Therefore,the investigation on fiscal decentralization between central and provincial level will miss important agents of local level and weaken the validity of academic analysis.The research in this dissertation makes up for the above shortcomings,helps to deepen the understanding of sub-provincial fiscal decentralization and basic public service among governments below provincial level,and deepens the action logic of sub-provincial governments in providing basic public service,which has strong theoretical significance and practical value.Specifically,the following contents constitute this dissertation to carry out the research.Firstly,the author outlines the concepts,connotation and definition of sub-provincial fiscal decentralization and basic public services in this dissertation.Sub-provincial fiscal decentralization is an extension of the central-provincial fiscal decentralization system,which includes governments of province,prefecture-level city,county and township.The concept of sub-provincial fiscal decentralization is mainly extended from the concept of central-provincial fiscal decentralization.At present,there is no clear definition in the academic circle.The author holds that sub-provincial fiscal decentralization is a financial system that focuses on the distribution of financial resources among multi-level governments with the assignment of powers as its content,and combines the characteristics of central-subnational fiscal decentralization.Basic public services are public services covering the minimum scope and boundaries that must be provided to maintain social stability and individual survival and development.They are based on social consensus and adapt to the level of national economic development.Secondly,the mechanism of sub-provincial fiscal decentralization on basic public services is explored and demonstrated.Sub-provincial fiscal decentralization has all the characteristics of Chinese-style fiscal decentralization.As the main provider of basic public services,prefecture-level city and county governments are not only subject to strict inspection and supervision by higher-level governments,but also face the constraints of the financial management model of ’one-level government,one-level budget’ in economic system.Under the dual constraints of political centralization and revenue decentralization,the promotion system of officials further leads to the competition among sub-provincial governments for growth,resulting in the distortion of expenditure structure.The fiscal expenditure bias that sub-provincial governments attach importance to capital construction and despise people’s livelihood expenditure not only leads to the insufficient supply of basic public services,but also exacerbates the imbalance of basic service areas,and also leads to the deviation of basic public services from residents’ needs.Thirdly,development of sub-provincial fiscal decentralization and basic public services and the status quo and issues of the two is analysed in this dissertation.There are significant differences in sub-provincial financial systems below provincial level in China and there is no unified framework.The decentralization model formulated by each province based on its own situation has not fully implemented the requirements of "tax sharing",resulting in many problems in the sub-provincial financial system.Although China’s basic public service system has developed rapidly since the 20th century,the supply of basic public services is still at a low level,the basic public service is not balanced,and the problem of mismatch between supply and demand is still very prominent.It not only leads to the long-term implementation of the urban-rural dual gap model of basic public service system,but also results in the level of economic development and the impact of fiscal expenditure bias.Fourthly,the author conducts an empirical study on the impact of sub-provincial fiscal decentralization on basic public services.Using multi-level data from the central,provincial,municipal,and county township levels from 2000 to 2013,the author constructs indicators for sub-provincial fiscal decentralization and basic public service indicators,and constructs the index system of sub-provincial fiscal decentralization and basic public services with China’s provincial panel data from 2000 to 2013.There is an inverted U-shaped relationship between sub-provincial fiscal decentralization and the supply level of basic public services.An empirical study on sub-provincial fiscal decentralization and regional balance of basic public services shows that lower levels of sub-provincial fiscal decentralization are conducive to the improvement of regional balance of basic public services,while higher levels of fiscal decentralization are the opposite.It is also found that increasing the degree of sub-provincial fiscal decentralization actually reduces the matching of supply and demand of basic public services through empirical research in China.The above empirical results are valid after the robustness test.Finally,the author puts forward relevant suggestions to perfect the sub-provincial fiscal decentralization system and basic public service system.It is necessary to straighten out the relationship of fiscal revenue between governments below provincial level,standardize and deepen the reform of fiscal powers and expenditure responsibilities,enhance the regulatory capacity of provincial governments,make the sub-provincial fiscal transfer payment system sound,fundamentally change local governments’ behavior,standardize the supply of basic public services to local governments,improve the feedback mechanism of basic public service demand,and optimize public participation in basic public services,guiding social forces to participate in the construction of basic public services.Compared with the existing research,the author not only systematically analyzes the motivation and the theoretical mechanism of sub-provincial fiscal decentralization and basic public services,but also expands the research framework of fiscal decentralization and public services.Based on the background of Chinese-style fiscal decentralization,the author systematically expounds the mechanism of sub-provincial fiscal decentralization affecting different aspects of basic public services from the relations of fiscal decentralization and economic development and basic public services,political promotion incentives,government competition,fiscal expenditure distortions and other dimensions.The author empirically analyzes the impact of sub-provincial fiscal decentralization and the supply of basic public services,the regional equalization of basic public service,and the matching of supply and demand of basic public services with panel data.It enriches the research topics and forms a useful supplement to literature.The research of this dissertation is based on the perspective of sub-provincial fiscal decentralization,and overcomes the shortcomings of literature focusing on the provincial level and ignoring the supply of basic public services for the prefecture-level city and county governments.It is necessary to further improve the measurement,expand the inspection range and test the impact of sub-provincial fiscal decentralization.The research is not only significant for the improvement of sub-provincial fiscal decentralization system,but also provides empirical evidence for regulating the fiscal expenditure behavior of sub-provincial governments and the construction of basic public services.The conclusions show that the distortion of sub-provincial government fiscal expenditure structure and the sub-provincial government behavior shaped by political promotion incentives has led to a low level of basic public service supply,regional imbalance,and mismatch between supply and demand.Based on the above analysis,the author puts forward the following suggestions.First,it is necessary to deepen the reform of the sub-provincial financial system,form a sub-provincial financial system with the matching of financial power and expenditure responsibility,allocate income between sub-provincial governments scientifically and reasonably,enhance the regulatory capacity of provincial governments,and standardize the sub-provincial transfer payment system.Secondly,it is important to standardize the behavior of the government in the field of basic public services,improve the public feedback mechanism and the participation mechanism of basic public services,and guide social forces to participate in basic public services reasonably.