Sub-Provincial Fiscal Expenditure Decentralization Structure: A Case in China

Abstract This paper uses the data from the post-1994 tax reform in China to investigate the vertical and spatial structures of sub-provincial fiscal expenditure decentralization (SPFED) in China. The study shows that, on the whole, SPFED tends to be gradually biased toward the county level, but inter-provincial differences are obvious, and the provincial centralization is more obvious in less economically developed regions. In terms of expenditure items, the province level enjoys a relatively higher level of economic expenditure decentralization (EED), and the county level enjoys a higher level of social expenditure decentralization (SED). In terms of internal structure, the difference in the level of EED shared by the province, prefecture and county levels is relatively smaller and the difference in the level of SED is relatively larger. In terms of spatial structure, in less developed regions, the province level enjoys a higher EED but a lower SED; in developed regions, the prefecture and county levels enjoy a higher EED but the prefecture level enjoys a relatively lower SED. These findings can provide empirical evidence for the reform of the division of power and expenditure responsibility, as well as the governance of sub-provincial governments.