| County governments plays a very important role in our long-term stability. The public goods and services provided by county government are vital to people’s livelihood. In 1994, the reform of tax revenue distribution has struck the balance between central and provincial fiscal distributions in public finance and established a steady growth mechanism of fiscal revenue. However, it did not draw a line about the responsibility between municipal government and county government. With the development of economy, problems regarding to the city-level and county-level fiscal systems begin to emerge. County governments shoulder huge responsibility providing public goods and services but do not have enough resources to keep it going. Therefore, how to improve the financial capability of the county government has become a very urgent problem. The Province-Managing-County Reform has been considered as a solution to tackle this difficulty, given the fact that it could reduce the financial management levels and improve the administrative efficiency of government finance. Whether the results of the reform is in line with the theoretical expectation or not? And what experience we learn from the reform? Those are very important questions, which we focus on.Based on panel data from 50 counties from 2000 to 2013 in Jiang Su province, the paper empirically analyzes the effects of the Province-Managing-County Reform(PMCR) on public financial capacity of county governments. It is found that PMCR dramatically improves the capacity of public finance of county governments. We also notice that PMCR’s effects on public financial capacity of county have something to do with the city that has administrative jurisdiction of the county. After PMCR, the public financial capacity improvement on the counties under the city with week capacity is more dramatic than those under strong city. We discuss the above findings and conclude with policy recommendations and suggestions. |
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