Balancing efficiency and equity in fiscal decentralization: theory and evidence from China

IF 5.1 1区经济学 Q1 DEVELOPMENT STUDIES

World Development Pub Date : 2026-03-01 Epub Date: 2025-11-11 DOI:10.1016/j.worlddev.2025.107226

Yixin Chen , Bingyang Lyu , Mengqi Niu

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Abstract

Fiscal decentralization is widely acknowledged as a pivotal contributor to China’s economic growth. However, there is a paucity of literature examining the underlying drivers of fiscal decentralization in China. This paper examines the drivers of intergovernmental fiscal relations in China: fostering economic development and mitigating regional disparities. After reviewing the evolution of the fiscal system since the Reform and Opening Up, we build a theoretical model to shed light on the objectives of fiscal decentralization and derive two theoretical propositions. By using panel data of prefecture-level cities from 2004 to 2016 and incorporating a newly developed fiscal decentralization indicator, we empirically test the theoretical propositions. The empirical analysis shows that the degree of fiscal decentralization decreases with an increase in GDP growth goals or larger fiscal disparities of subordinate county-level governments. This paper not only shows that balancing efficiency and equity in determining fiscal decentralization, but also offers insights for developing countries on how to build a more effective fiscal decentralization system.

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财政分权的效率与公平平衡：来自中国的理论与证据

财政分权被广泛认为是中国经济增长的关键因素。然而，研究中国财政分权的潜在驱动因素的文献很少。本文考察了中国政府间财政关系的驱动因素：促进经济发展和缓解地区差异。本文在回顾改革开放以来财政体制演变的基础上，构建了一个理论模型来阐释财政分权的目标，并推导出两个理论命题。本文利用2004 - 2016年地级市面板数据，结合新建立的财政分权指标，对理论命题进行实证检验。实证分析表明，财政分权程度随着下级县级政府GDP增长目标的增加或财政差距的扩大而降低。本文不仅表明了在决定财政分权时要平衡效率与公平，而且为发展中国家如何构建更有效的财政分权制度提供了启示。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

World Development Multiple-

CiteScore

12.70

自引率

5.80%

发文量

320

期刊介绍： World Development is a multi-disciplinary monthly journal of development studies. It seeks to explore ways of improving standards of living, and the human condition generally, by examining potential solutions to problems such as: poverty, unemployment, malnutrition, disease, lack of shelter, environmental degradation, inadequate scientific and technological resources, trade and payments imbalances, international debt, gender and ethnic discrimination, militarism and civil conflict, and lack of popular participation in economic and political life. Contributions offer constructive ideas and analysis, and highlight the lessons to be learned from the experiences of different nations, societies, and economies.