Reforms on county-level fiscal governance in China: impact on urban-rural income inequality

ABSTRACT

The latest fiscal reforms in China have been on the county level and bundled both fiscal decentralization and fiscal spending. The present study investigates whether such bundled fiscal reforms affected one important social dimension: urban-rural income inequality. Using quasi-experimental data, the study shows that fiscal decentralization benefited only urban residents and that fiscal spending promoted income growth for both urban and rural residents, though growth velocity slowed down over time. Together, the bundled fiscal reforms saw disparate impact on urban and rural residents, with positive effects on rural income growth and negative on urban peers. The latest fiscal reforms did not enlarge urban-rural income inequality and even slowed down their growth velocity. The impact of fiscal reforms has been largely embedded into extant urban-biased institutions and questions the possible limits of state-led development policies. This study concludes by discussing policy and theoretical implications of research findings.

KEYWORDS:

• Fiscal decentralization
• fiscal spending
• income inequality

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Notes on contributors

Xuhong Su

Xuhong Su is an associate professor in the Department of Political Science at the University of South Carolina, Columbia. Her research interest is focused on public management and science policy.

Kelan Lu

Kelan Lu is an assistant professor in the Department of Political Science at the University of South Carolina, Columbia. Her research interest is on china politics and policy.

Xiangming Hu

Xiangming Hu is a full professor in College of Public Administration at Beihan University, China. His research interest is on risk assessment and emergency management.

Yuqiong Xiang

Yuqiong Xiang is a full professor in College of Public Administration at Nanjing Agricultural University. Her research interest is on public management and public values.