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Vertical Intergovernmental Fiscal Relation Reform and Grassroots-level Government's Finance Guarantee: Based on Quasi-natural Experimental Analysis

【Authors】
NING Jing & ZHAO Xujie
【WorkUnit】
NING Jing (Central University of Finance and Economics, 100081)ZHAO Xujie (University of International Business and Economics, 100029)
【Abstract】

Grassroots-level government's finance situation is crucial to the performance of financial functions of the whole country. How to adjust the vertical intergovernmental fiscal relation in order to improve grassroots' level governments finance situation is important for accelerating the establishment of a modern fiscal system. In recent years, Province-Directly-Governing-County (PGC) fiscal reform has been an important attempt to straighten out vertical fiscal relations between governments at different levels, and has made it possible for studying the effects of vertical intergovernmental fiscal relation reform on grassroots-level government's finance based on quasi-natural experimental analysis. Therefore, this paper researches empirically the PGC fiscal reform based on nationwide county-level data applying Propensity Score Matching with Difference-in-Differences Method (PSM-DID), in order to investigate the effect of the reform on county governments-disposable revenue and identify the influence path. The results indicate that PGC fiscal reform has played an obvious role in increasing county governments' disposable revenue, more in increasing upper-government transfer payment than in increasing the county-level own revenue. It means that the reform increases county governments' disposable revenue mainly by restraining prefecture-level cities from grabbing county-level transfer.


JEL:H11, H71, H77

【KeyWords】
Vertical Intergovernmental Fiscal Relation Reform, Grassroots-level Government, Fiscal Finance Guarantee