A Study On Fiscal Pressure And Expenditure Bias Of Basic Public Services

In recent years,in order to cope with the downward pressure of the domestic economy,our country began to implement a large-scale tax reduction and fee reduction policy.The policy of tax reduction and fee reduction brings new challenges to China’s local governments: insufficient sources of income,unabated expenditure pressure,and expanding fiscal deficit.Under the environment of financial pressure,the fiscal expenditure behavior of local governments is bound to change.This paper takes the people’s livelihood expenditure bias of local governments as the starting point to investigate whether the financial pressure will have an impact on the basic public service expenditure bias of local governments.Financial pressure is a kind of financial tension which the government can’t make ends meet under the condition of unbalanced financial revenue and expenditure,that is to say,the government’s financial capital supply in a certain period is not enough to meet its financial capital demand.Under the financial pressure environment,local governments are faced with the financial dilemma that the income can not cover the expenditure.At this time,they have to allocate the limited income among various expenditures.After meeting some fixed and bottom line expenditures,the allocation of remaining income will be biased towards the plan to alleviate the pressure.The expenditure on basic public services,as a collection of security expenditure such as education and medical treatment,has the following three characteristics: in the first place,weak economic effect.In other words,in the short term,it is more reflected in the social welfare expenditure with the nature of security,and the effect in promoting economic growth can be seen only after a long period of time;In addition,strong externalities.Different from public goods such as infrastructure construction,the economic growth effect brought by education and medical treatment has greater spillover.While benefiting the development of this region,they also play a positive role in promoting other regions;Last but not least,it accounts for a large proportion of fiscal expenditure and has a certain discretionary space.The above three characteristics of basic public service expenditure jointly determine the distribution bias of surplus income in fiscal expenditure.Weak economy and strong externality have become the internal driving force of local government expenditure preference,and the discretionary nature of basic public service expenditure itself also provides a certain operating space for local governments to realize this motivation.Therefore,in theory,the greater the financial pressure,the more the local government will weaken the tendency of financial distribution of basic public services.On the basis of the above theoretical analysis,this paper empirically tests the correlation between the two by using the data of prefecture level cities from 2012 to2018.The empirical results show that local fiscal pressure has an obvious negative effect on the investment bias of regional basic public services.At the same time,the heterogeneity analysis also shows that there are differences in the behavior strategies of different local governments under the environment of financial pressure: for the governments with strong financial absorptive capacity,the negative impact of financial pressure on the investment bias of basic public services is not necessarily established,but for those local governments with weak absorptive capacity,fiscal pressure still has a significant negative impact on local government expenditure bias of basic public services.In addition,the impact of financial pressure on the bias of basic public service investment is also heterogeneous among cities with different status.For provincial capital cities,the negative effect of financial pressure on the expenditure bias of local government basic public service is not necessarily established,but it is still true for non-provincial capital cities.In addition,the classified regression results show that in the face of financial pressure,although the financial bias of local governments towards the supply of basic public services has weakened,the local government will also weigh the specific expenditure strategies.While reducing part of expenditure on the livelihood of the residents under the jurisdiction,they will also maintain the stability of another part of important people’s livelihood expenditure,so as to achieve the compatibility of regional economic development and people’s livelihood security as much as possible.On the one hand,the research of this paper provides a certain degree of reference for the local government’s behavior tendency in the supply of basic public services under the current background of tax and fee reduction.On the other hand,this paper provides insights from the perspective of fiscal pressure for better promoting and implementing the reform of division of authority and expenditure responsibility.