Design And Simulation Of A Province To County Formula Based Transfer Payment Model Of Compulsory Education

In recent years, there emerged a conspicuously quantitative and qualitative inequality in compulsory education among regions, urban and rural areas and even social groups. Furthermore, intra-city settlements by school choice also appeared, accompanying the polarization of income and social status. Those processes and their consequences severely constrained the human capital accumulation of low income people, and led social segregation. Therefore, it's critical to get rid of the inequality in compulsory education, which is an issue counting to sustainable economic development and harmonious society in our country.This paper, in the first place, compares three policy positions in literature, namely, powers of the authority structural adjustment, fiscal transfer payment system and eliminating the restraint of population mobility caused by hukou system. After detailed analysis, I point that fiscal transfer payment is a persistent policy choice in this country. Based on the fiscal system of province directly governing counties and the present unfairness situation of compulsory education, this paper established the logic that province-to-county transfer payment of compulsory education is quite necessary. Then Zhejiang province was selected as a case, because this province has a long history of practicing province directly governing counties, it's a leading card of the fiscal relation between provincial government and county-level ones.In the following paragraph, I show the institutional background by reading the main governmental texts (e.g. administrative measures, office regulations). My purposes are to refine the institutional framework of compulsory education in Zhejiang province and, especially, the practice routes of province-to-county transfer payment of compulsory education. Then I further analyze the defects of the existing fiscal transfer payment system of compulsory education, involving the high ratio of special fiscal transfer payment, the unindependent budget process of general purpose transfer payment and the simple calculation in the formula-based transfer payment, etc. These drawbacks drive us realizing an improved fiscal transfer payment is very important for balanced development of compulsory education in Zhejiang, they also provide the realistic basis for the design of formula-based transfer payment in the next part.To observe the effect of existing transfer system, based on a dataset containing 51counties in year 2008, the paper employs BIA, a classic method in public economics, to assess the fairness of compulsory education expenditure before and after special fiscal transfer payment. The result reveals special fiscal transfer payment has some redistributive tendency, but be too weak to play a significant fiscal horizontal equalization effect. It brings to light that there is considerable space to improve existing policy or system.The third paragraph is the core of the paper. First of all, I retrace its development history and its practice in our country. Then, based on the practice in Zhejiang and the requirement for improving formula-based transfer payment, a model simultaneously considering fiscal expenditure need and fiscal capacity is proposed. To compare with the former analysis and statistical result, calculation of the proposed model still bases on the dataset of 51 counties in year 2008. Method of regression is operated to calculate the theoretical fiscal capacity and expenditure need of compulsory education, then, the transfer payment of each county can be obtained under the model. I find the calculated total amounts of fiscal transfer payment fairly match the real ones, moreover, the fiscal horizontal equalization effect is well examined, that is to say, the designed formula-based transfer payment model achieves the anticipating effect.In the simulation process of the proposed model, I give detailed theoretic analysis of each factor and elaborate discussion of the empirical results, trying to enhance the model's preciseness, ensure its scientificalness and objectivity. However, there is still scope for policy intervention. Firstly, there is a potential gap of funds between the real supply and the theoretic need, which provides the adjusting space for vertical imbalance for provincial department of public finance and, secondly, I implement a up-adjusted standard endeavour so that the simulation results exhibit more distributive effect, which offers a reference base for more strong fairness preference of the provincial government.Finally, the paper brings up a package of matching measures to support the model's operation and its real effect in practice. The main measures include taking provincial department of public finance as the leading department, as well as other departments'coordination, selecting desirable approach of fund transfer and making budget of fiscal transfer payment of compulsory education and, strengthening supervision.