Empirical Study On The Influence Exercised By The Reform Of The Provincially Administered Counties Over The Financial Budgetary Revenues And Expenditures At County Level

As required by the Decision of CPC Central Committee on Major Issues Concerning Comprehensively Deepening Reform, the administration division shall be further optimized and the qualified regions shall explore and facilitate the institutional reform concerning the provincially administered counties (cities). The in-depth study and implementation of the guidelines in the Decision has made a practical and urgent demand on the reinforcement of the study about the reform of the provincially administered counties.Since the tax sharing reform in1990s, a growing number of people have questioned the administrative system of the provincially administered counties. With the wide social attention paid to the financial difficulties in counties and townships as well as the county-level economic development problems, majorities of scholars and governmental officials pin their hope on the financial system reform of the provincially administered counties. Since Zhejiang granted greater economic management power to a large quantity of countries and cities in1992, the regions nationwide have successively organized and implemented the pilot reforms of the provincially administered counties. In July2009, the Ministry of Finance published the Opinions on Facilitating the Financial Reform of the provincially administered counties, which requires that the reform of the provincially administered counties should be comprehensively boosted from the perspective of central government. Based on the power expansion of strong counties and the support for the weak counties in2003, Shandong Province issued the Notice on Implementing Pilot Reforms of the Financial System in the Provincially Administered Counties (Cities) in October2009, after which the financial pilot reforms of the provincially administered counties were commenced. Though the reform of the provincially administered counties is deemed as the significant measure taken to address the financial difficulties of county-level governments, there is a lack of empirical study on this issue in Shandong Province.Against the background where Shandong implements the financial reform of the provincially administered counties, this study pays particular attention to the actual effect of reform policies, making a comprehensive analysis on the actual influence exercised by the policy implementation process over county-level financial budgetary revenue and expenditure through the difference-in-difference and the statistically econometric method. In the light of the statistically econometric analysis result, the reform of the provincially administered counties has a significantly positive influence on the increase in the budgetary revenue of the pilot counties and cities, but an insignificant influence on increase in budgetary expenditure. Meanwhile, the result also shows that the provinces where per-capita financial budgetary expenditure is low and the provincial financial expenditure only constitutes a small proportion are caught in the trap of the provincially administered counties in the implementation process of reform. To overcome the deficiencies, this study has discovered the root causes of the problems and meanwhile presented relevant measures accordingly.In this paper, there are five chapters. The first chapter is introduction, which elaborates the research background and significance of the reform of the provincially administered counties as well as the research methods. Meanwhile, it points out the innovations and the possible deficiencies, and clearly defines the framework of this paper. The second chapter is about domestic and overseas research literature, which has summed up overseas fiscal decentralization and flat management theories and elaborated the significance, effectiveness and measures of the reform of the provincially administered counties. The third chapter revolves around the reform progress of the reform of the provincially administered counties, giving a review of the reform of the provincially administered counties in China as well as the reform progress of the provincially administered counties in Shandong. The fourth chapter focuses on the effect hypotheses and practical test of the reform of the provincially administered counties. In this chapter, four hypotheses after the reform of the provincially administered counties are proposed according to existing literature theories, and then studied from the empirical perspective. In accordance with the rigorous econometric analysis, the financial reform of the provincially administered counties has a significantly positive effect on financial revenue growth but an insignificant effect on financial expenditure increase, and provincial finance departments strengthen the support for the pilot counties and cities continuously, but the municipal ones behave in an opposite way. As revealed by the analysis on the support for the pilot counties offered by municipal and provincial finance bureaus, Shandong Province falls into the trap of the provincially administered counties in the reform process due to the lack of provincial financial support. The fifth chapter is the inspiration drawn from practical test. According to the empirical study in the fourth chapter, the fifth chapter points out the positive effect produced by the reform of the provincially administered counties, and performs an objective analysis on corresponding problems as well. On this basis, relevant policy suggestions have been researched and explored to provide referential basis for deepening the reform in Shandong Province and even other regions.