The Multidimensional Analysis Of Sub-national Financial Disparity In China

The development of economy in China has experienced more than 30 years of rapid growth and increasingly large economic aggregate, but at the same time,disparity in regional development has gradually become a heated issue. As for the finance area, the regional development disharmony is the important factor that leads to sub-national fiscal disparity. Since the wide variance in financial resources would directly influence the realization of the functions of the government and public services level, and then could do harm to the long-term steady-growth in economy as well as the social harmony and stable development, therefore, exploring the actuality of fiscal disparity and underlying factors are of great significance to narrow the fiscal difference, promote regional balanced economic and social development.Based on above, this paper systematically analyzes the China’s inter-regional fiscal disparities. And the text is divided into five parts totally. The chapter 1 serves as an introductory part, the chapter 2 is theoretical analysis about the causes of fiscal disparity, contains the definition of the relevant concepts as well. On the basis of the chapter 1 and 2, the main content of chapter 3 is the present situation research about sub-national fiscal disparities, selecting the budgetary data of 31 provinces from 2004 to 2013 and using several independent indicators for building an integrated evaluation system to fully exhibit the present situation and the trend of change about disparity of inter-regional financial capacity. The chapter 4 is the empirical analysis of the causes of local government fiscal disparity, conducting a decomposition of difference by incomes sources and regions to find out the main causes and analyze to what extent each factor influence the disparities. Finally, based on the preceding research, the chapter 5 puts forward some countermeasures of equalizing fiscal capacity.According to the above research frame, the main conclusions of this dissertation are as follows:(1) in general, fiscal disparities at province-level in China is apparent and significant, but the difference is decreasing;(2) after considering the difference of public cost payout among regions, the degree of fiscal disparity significantly decrease;(3) from the standpoint of spatial dimension, according to the traditionalregional division method, the disparity of inter-regional fiscal capacity gives the biggest contribution to the overall sub-national fiscal disparities, and among the regions, the disparity of inter-province in the eastern has the most important influence while that of inter-province fiscal disparities in the western is smaller but with constant expansion; meanwhile, dividing area by the features on economy and society, the results show that the disparity of inter-regional fiscal capacity and the inter-province fiscal disparities in the same region are both important factors that lead to the overall sub-national fiscal disparities. Among them, the variance within the fourth section contributes most;(4) through the structural decomposition of fiscal inequality, general budget revenue is the main cause to the inequality, the net transfer payment from central government has negative relatively marginal effect, which is helpful to reduce overall financial inequality, but the equilibrium effect is limited.And in the general budget revenue, tax revenue is the key cause of regional financial imbalances; non-tax revenue can reduce the overall financial inequality to a certain extent. One step further, of all the tax revenue resources, what matters most to the fiscal disparity is business tax, besides, value added tax, corporate income tax and personal income tax are three other main revenue resources that lead to the overall sub-national fiscal disparities, while urban land use tax, farming land occupation tax and some small taxes are conducive to narrow regional public financial difference.Combining the theoretical analysis and empirical findings, this article suggests,importance should be attached to the following three aspects to reduce the disparity of financial capacity: first, increase economic policy support for distressed regions and promote regional economy coordination development; second, reform the existing system of tax allocation and improve the local tax system; third, optimize the structure of transfer payment from central government, achieve the goal of fiscal redistribution which should follow the principle of "equality in priority, and giving consideration to efficiency".