The Impact Of Reforms Of Educational Fiscal Institution After2001on Inter-county Educational Spending Disparity In China

Fiscal underinvestment and regional disparities in compulsory education are thetwo major obstacles in the21st century China education development. Faced with thisdilemma, the central government began to seek changes in compulsory educationalmanagement system and fiscal institution from2001. According to the limitedfinancial resources of the township government, it can not be guaranteed to inputsufficient funds for the rural compulsory education. The central government began toimplement the rural compulsory education funds co-ordination and managementresponsibility “for the township to the county” system reform in2001, and toimplement “under the leadership of the State Council, local governments areresponsible for management at different levels, to county-based system of compulsoryeducation.” After that, the State Council put into practice “New Mechanism forEnsuring Funds for Rural Compulsory Education” in2005strengthening the higherlevels government’s responsibility for compulsory educational fiscal expenditure, toimplement compulsory education “two remissions and one subsidy” policy, toimprove the compulsory educational financial security level of economicallybackward areas and solve compulsory educational resources configurationirrationality and regional inequality. In this context, this paper use the description andregression analysis methods, studied the inter-county inequality’s changing trend ofthe public education expenditure before and after the two reforms, as well as tworeforms effect on the improvement of the inter-county gap in depth.In the description analysis section, this study uses a variety of summaryindicators anglicizing disparities’ changing, such as the Gini Index and Theil Index.The results show that the inter-county disparities of public educational expenditurefirst increased and then decreased between1999-2007, and the inter-countydifferences of public education expenditure was still mainly in provincial differencessince2001. In addition to the summary indicators, the thesis also tries to adopt a moreinnovative and cutting-edge non-summary method, the relative distribution approach,to analyze the inter-county inequality’s changing trend of the public educationexpenditure before and after the two reforms. This analysis founds a number ofdisparities changing features that previous studies never observed. And the resultsdisplay that local public education expenditure distribution at the county levelundergone great changes before and after the two reforms between1999-2007. Therewas the location effect in the existing distribution changing, and also the shape effect.But overall the location effect (that is the level of expenditure) was relatively large,and shape effect (that is the differences changing) was relatively small. The effect of“County-based” reform to the inter-county differences of public educationexpenditure was relatively small, mainly as “median improvement, two ends polarization”, while the effect of “New Mechanism” reform to the inter-countydifferences of financial expenditure on education was relatively large, mainly for “twoends improvement, the upper and lower quartile polarization. After two reforms, alarge number of county-level units transferred to the upper and lower quartile positionof the public education expenditure distribution, so the polarization index valuesincreased constantly.In the regression analysis section, to solve the heteroscedasticity and endogenousproblems that may exist for the panel data analysis, this article used the instrumentalvariable method together with GMM estimation techniques, studying the effect topublic education expenditure differences of two reforms “County-based” and “NewMechanism” with regression analysis. The regression results show that under thecontrol of regional finance disparity and educational needs differences, two reforms’improvement to the lower median and bottom part of the county-level publiceducation expenditure distribution was not obvious, and the improvement was mainlyto the upper median and top part. Compared to the effect of the regional financialdisparity and per household pupils differences, the two reforms’ improvement effectto the inter-county educational fiscal expenditure disparities was not obvious, andwould to some extent offset by the increasing regional financial disparities andeducational needs differences.Based on the empirical research conclusions, the paper puts forward somevaluable policy advice on the further adjustment and deepening reform for Chinacompulsory education finance system, including raising the provincial government’sfiscal responsibility for compulsory education, establishing compulsory educationhorizontal fiscal transfer payment system and relatively independent compulsoryeducational financial institution, and so on.