Research On The Impact Of Household Registration System Reform On Fiscal Expenditure Bias

Since the reform and opening up,China’s economy has experienced nearly 40 years of rapid growth,which can be called the "miracle of world economic growth".Specifically,the performance appraisal with GDP as the core drives competition between local governments to promote growth,leading to competition for infrastructure spending,tax competition and budget expenditure competition among local governments.In the 21st century,the economic growth efficiency of physical capital and other factor inputs has declined,and the decline in population fertility and aging have made the demographic dividend disappear.The population agglomeration in the city not only contributes knowledge and talents to urban development,but also drives the growth of consumer demand.Therefore,as laborers and consumers,people have gradually become valuable resources for cities to compete for,and the competition mode of local governments has gradually shifted to "competition for the sake of grabbing people".At the same time,the hukou system has been a huge obstacle to the movement of people in our country.In recent years,as the reform of the household registration system has entered a new stage,China’s internal immigration has shown a significant increase.Internal migration grew from 6.75 million in 1982 to 380 million in 2020.Between 2010 and 2020,the migrant population grew from 150 million to 380 million,and the growth rate of domestic migration in China accelerated compared with the previous decade.At the same time,China’s aging population is becoming increasingly serious,and the birth rate is declining.According to the population data released by the National Bureau of Statistics over the years,after the implementation of the comprehensive two-child policy in 2016,the net increase in population reached 9.06 million in that year,and the annual net increase in population continued to decline in the following years,from 2017 to 2021 were 7.79 million,5.3 million,4.67 million,2.04 million and 480,000 respectively.As Tiebout’s "vote with your feet" mechanism is proven in China,public services have become an important factor affecting labor mobility in addition to income and employment,so it is important for local governments to attract people by increasing the supply of basic public services.The purpose of this paper is to study whether local governments will improve fiscal spending bias and increase the supply of basic public services in order to attract population inflow after the relaxation of household registration restrictions.Although the reform of the household registration system in China has been carried out successively after 2000,before 2014,it was limited to established towns and small cities,involving too few cities,while the reform of the household registration system in 2014 was at the national level,including all cities,and the intensity was unprecedented.This paper uses the "Opinions of the State Council on Further Promoting the Reform of the Hukou System"(hereinafter referred to as the "2014 Opinions")as a quasi-natural experiment,and uses the traditional DID method to investigate the impact of the relaxation of the hukou system on the public service supply behavior of local governments under the background of intensified population migration.According to the "2014 Opinions",cities with urban populations below 3 million were used as the treatment group,cities with more than 3 million were used as the control group,and 2014 was used as the time when the policy occurred.The dependent variables of this paper mainly include education expenditure,medical expenditure,infrastructure construction expenditure,per student education expenditure,per capita medical expenditure and per capita infrastructure construction expenditure,and the double difference method is used to test the impact of relaxing the restrictions on internal immigration on the fiscal expenditure bias of local governments.Through empirical analysis,the following conclusions are drawn:First,lowering the settlement restrictions has increased the tendency and level of local government public service expenditure,and the expenditure on education and medical care in cities with relaxed household registration has increased significantly.Second,the increase in local government public service expenditure is not all the result of passive selection after the inflow of population,and per capita expenditure has also increased significantly,and the per capita education expenditure and per capita medical expenditure in cities with relaxed household registration have increased significantly.Third,heterogeneity analysis shows that the relaxation of household registration restrictions has a greater impact on the fiscal expenditure bias of small and mediumsized cities.In addition,further analysis showed that the relaxation of household registration restrictions had the most significant impact on the migration decisions of individuals with preschool children.The innovation point of this paper:At present,the influencing factors of fiscal expenditure bias in domestic literature mainly focus on fiscal decentralization and transfer payments,and this paper discusses the impact of household registration system reform on fiscal expenditure bias from the perspective of intensifying the government’s"competition for grabbing people" by the government,which is relatively novel,and at the same time provides a new idea for increasing basic public service expenditure.Disadvantages of this paper:Since the details of fiscal expenditure published in the statistical yearbook of each province are not exactly the same,there are fewer cities that can collect other expenditure data except education expenditure,medical expenditure,social security and employment expenditure,and infrastructure construction expenditure,so this paper does not analyze and study other types of expenditure,and there is a lack of detailed expenditure comparison.In addition,the education expenditure data comes from the "Urban Statistical Yearbook",the data is relatively complete,and the medical expenditure and infrastructure construction expenditure come from the statistical yearbook of each province,not every province publishes relevant data,so in order to ensure the sample size,education expenditure,medical expenditure and infrastructure construction expenditure respectively use their own panel data,in the benchmark regression will find that the sample size of education expenditure,medical expenditure and infrastructure construction expenditure is different.