Province-Managing-County Reform and Public Education Spending: A Quasi-Natural Experiment of Fiscal Decentralization in China

33 Pages Posted: 30 Sep 2011

See all articles by Wen Wang

Wen Wang

Indiana University Purdue University Indianapolis (IUPUI) - School of Public and Environmental Affairs (SPEA)

Xinye Zheng

Renmin University of China - School of Economics

Zhirong Jerry Zhao

University of Minnesota - Twin Cities - Hubert H. Humphrey Institute of Public Affairs

Date Written: May 1, 2011

Abstract

Since the 1990s, China has pushed forward the province-managing-county (PMC) reform in some provinces as an experiment of fiscal decentralization. The reform provides a good opportunity to examine the impact of fiscal decentralization on fiscal behaviors of local governments in China. Using a dataset of 108 counties in Henan Province during 1999-2008, we use a difference-in-differences approach to investigate how the PMC reform affects local public education spending. The results show that counties given additional fiscal autonomy tend to spend a lower share of their annual expenditures on public education than other counties do. The findings suggest that fiscal decentralization makes local governments more responsive to their performance incentives but not necessarily to the long-term benefits of local residents.

Keywords: Fiscal decentralization, education spending

Suggested Citation

Wang, Wen and Zheng, Xinye and Zhao, Zhirong Jerry, Province-Managing-County Reform and Public Education Spending: A Quasi-Natural Experiment of Fiscal Decentralization in China (May 1, 2011). Available at SSRN: https://ssrn.com/abstract=1935849 or http://dx.doi.org/10.2139/ssrn.1935849

Wen Wang (Contact Author)

Indiana University Purdue University Indianapolis (IUPUI) - School of Public and Environmental Affairs (SPEA) ( email )

801 West Michigan Street, BS 4062
Indianapolis, IN 46202
United States
3172741078 (Phone)
3172741078 (Fax)

HOME PAGE: http://www.spea.iupui.edu/facultyandstaff/faculty-directory/wwang.php

Xinye Zheng

Renmin University of China - School of Economics ( email )

No. 59, Zhongguancun Street
Beijing, Beijing 100872
China

Zhirong Jerry Zhao

University of Minnesota - Twin Cities - Hubert H. Humphrey Institute of Public Affairs ( email )

301 19th Ave S
Minneapolis, MN 55455
United States

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