The Impact Of Fiscal Transfer To Education Expenditure Of Local Government

Since China’s reform and opening up policy, Chinese education finance system reform has been steadily advancing. In order to solve the lack of compulsory education financial investment and the inter-regional non-equal, the Chinese authority has made unremitting exploration. Many of the reforms has milepost sense, such as the reform of "county-based" management system for rural compulsory education in 2001 and the"clear responsibility at all levels, funds-sharing between central and local government, increase of financial input and improvement of the level of protection, organization and implement step by step which is called "the new mechanism reform" in 2005. The aim of the reforms focuses on moving the center of balance for financial expenditure towards compulsory education to the senior level government which has sufficient financial resources. At the same time, the reforms aim to strengthen the responsibility of high-level government on transfer payment, particularly to strengthen financial support of education.Under this background, this article uses the 2007 county-level fiscal statistics as sample and the method of quantile regression to study empirically the different impact of education grants on the educational expenditure of local government, specially the rural compulsory education subsidies.In this paper, the empirical study found that in terms of nationwide, the influence coefficients of both general transfer payments and special transfer payments to local education spending are shown to rise with the increase of the local education spending. The value of coefficients are between 0-1. However, the incentive effect on local education spending of general transfer payment is better than that of categorical financial transfer payment. But the rural compulsory education grants have more impetus at a low level and high quantile quantile, but it is relatively small in the middle and upper level.Since the level of economic development in different regions are different, the private financial capacity of local government has important influence on the supply of public goods, especially the compulsory education which uses the local county government as the main body of investment. So it is necessary to analysis the effect of fiscal transfer payment among the eastern, middle and western areas.The empirical results of this study confirmed that:the effect trend of the general transfer payment and special transfer payment among the Eastern, Middle and Western areas appears to be the same.With the rising level of per student spending, both general and special transfer payments increase its effect on local educational expenditure. But for different regions, the types of transfer payment that have the leading influence are very different.The special transfer payments has greater incentives to the eastern region. However,the general transfer payments play a more important role in the middle and western regions.The rural compulsory education subsidies even has a strong irritant effect towards the western region(the coefficient is greater than 1).That is to say, the special transfer payment only for compulsory education promotes the development of education in the western region.Based on the conclusion,this paper also aims to put forward some valuable policy suggestions for the further adjustment and deepening of the compulsory education financial transfer payment system,such as adjusting the proportion of special transfer payments, strengthening the budget management, increase the education special transfer payments to the western underdeveloped area and changing the local government officials’ promotion system.