An Essay On Theory And Effects Of Fiscal Revenue Distribution Among Sub-provincial Governments In China

The intergovernmental fiscal relationship is a basic institutional arrangement for vertical power structure between governments at all levels of a country or region.It is a constraint rule for the distribution of fiscal revenues among governments,and has a significant impact on economic development and social security.The fiscal relationship among sub-provincial governments is an extension of the fiscal relationship between the central and local governments.It is also an important part of the tax-sharing fiscal system in China.However,the existing representative literature on fiscal relationship among sub-provincial governments in China and its effects is very scarce,which making the research about the fiscal relationship among sub-provincial governments and its effects a "Black Box" that needs to be opened urgently.This essay attempts to clarify the "black box" in a certain extent by answering the following three levels of questions.First of all,what is the current fiscal relationship among sub-provincial governments in China? What are the characteristic facts of fiscal revenue distribution? Second,is the current fiscal revenue distribution among sub-provincial governments reasonable? If it is inappropriate,what principles should be used for fiscal revenue distribution? Third,what kind of impacts will the current fiscal relationship among sub-provincial governments have on economic development and social security,including economic growth,environmental quality,and urban-rural income gap?The second chapter,through combing and reviewing the existing literature in six aspects,clearly shows the overall appearance and possible problems of the existing research in this field.There are many possible problems including the lack of representative literature,the inconsistent research conclusions,the relatively single research perspective,and the challenging research methods.The results have strong enlightenment significance and high reference value for the follow-up research of this essay.The third chapter systematically sorts out the institutional arrangements of fiscal revenue distribution between sub-provincial governments of 31 provinces,autonomous regions,and municipalities in China.And the chapter also calculates the distribution of general public budget revenues and four major tax revenues at the three levels governments of provinces,cities,and counties.This chapter also calculates the relationship between fiscal revenue concentration and the proportion of expenditure responsibilities at the level of provinces and cities.Despite the current chaotic and diverse forms of fiscal revenue distribution among sub-provincial governments,after 2002,it still reflects the characteristics of tax sharing as a whole,while showing obvious characteristics of "floating up fiscal revenues and sinking fiscal expenditure responsibilities".The current reform of the China's fiscal system has two aims: financial coordination and regional balance.The fourth chapter reveals two principles underlying the implementation of fiscal revenue distribution in sub-provincial governments based on two documents issued by the State Council in 1993 and 2002:“the greater the proportion of higher-level government expenditure responsibility,the higher the concentration of fiscal revenue”,and“the greater the degree of imbalance in per-capita fiscal revenue in the districts under the jurisdiction,the higher the concentration of fiscal revenue”.In addition,this chapter examines the implementation of the general public budget revenue and the four major tax revenue distributions in sub-provincial governments.Chapters 5 to 7 provide evidences to the third-level questions by studying the impact of sub-provincial fiscal revenue sharing and sub-provincial intergovernmental transfers on county economic growth,county environmental quality,and the urban-rural income gap within the county,respectively,at the county level.In the theoretical analysis,these chapters construct models of tax sharing and intergovernmental transfers to reveals the impact mechanism the fiscal revenue sharing and sub-provincial intergovernmental transfers on county economic growth,county environmental quality,and urban-rural income gap within the county.Empirically,based on the unbalanced panel data of 1930 county-level units and 26 province-level units in China from 1997 to 2009,using the endogenous SYS-GMM and instrumental variable GMM methods,these chapters carry out the impacts,a series of robust checks,channel mechanism analysis and heterogeneity analysis.The main findings of the analysis are as follows.The first,an increase in fiscal revenue sharing of county-level will reduce county economic growth,reduce county environmental quality,and expand the urban-rural income gap within the county.The second,the negative effect of the increase in fiscal revenue sharing of county-level will be weakened by intergovernmental transfers.The third,the incentive effect of the increase in fiscal revenue sharing of county-level is strongly heterogeneous,and the role of transfers is not clear,and it must be treated with caution.By answering the above three levels of questions,this essay clarifies to a certain extent the fiscal relationship among sub-provincial governments in China,and initially establishes a research framework for the effects of fiscal relationship between governments among the sub-province levels.This essay also provides new empirical evidences for the phenomenon of sustained rapid economic growth in China,and a solid theoretical basis for the establishment of a new type of sub-provincial fiscal relationship with Chinese characteristics.The results also can provide reform suggestions for the urgently needed reform of China's sub-provincial fiscal revenue distribution.