6176 
5915Medical and health services concerns the well-being of people. It is fundamental for promoting the construction of China’s people-centered health strategy and realizing the development for the benefit of all. This study proposes a theoretical model of yardstick competition " from the top” and discusses the existence of inter-city tactful interaction behaviors in healthcare spending among prefectural-level municipal governments within the framework of a decentralized system. Very often, healthcare spending decisions made by prefectural-level municipal governments are influenced by the relevant strategies of the neighboring cities. Based on the data from 283 prefectural-level cities in China from 2007–2013, and using the dynamic spatial Durbin model (SDM), empirical tests are performed at the prefectural level to investigate the effects of interactions between cities within the same province, as well as the impacts of fiscal decentralization and its spatial tactful interactions in healthcare spending. We conclude that significant strategic interactions exist among municipal governments in government healthcare spending. Furthermore, the strategic interaction of government healthcare spending belongs to complementarities. This indicates that if the adjacent municipal government raises the level of healthcare spending in the same province, the city government's optimal strategy will be to increase the level of government health spending accordingly, with cities characterized by geographical proximity and competing more strongly for government healthcare spending. Moreover, fiscal decentralization seems to drive the supply of government health services, as tactful interactions tend to limit government health spending. This explains why the share of government health spending has been hovering at around 2%. Overall, the implementation of competitive or incentive mechanisms and optimized financial arrangements emerge as a truly effective policy to stimulate the supply of government health services. The potential contributions of this paper are as follows. Firstly, in theoretical research, considering welfare maximization decision-making under the restriction of limited resources, this paper develops a " top-down” competition model for government healthcare spending between municipal governments using the interaction theory framework. Secondly, the dynamic spatial Durbin model (SDM) is used to solve the " path dependence” characteristics of government healthcare spending and to ease the problem of "endogeneity". The research conclusion is more accurate after a comprehensive consideration of government healthcare spending over time, space, and time-space lag effects. Thirdly, based on a panel data of 283 prefectural-level cities from 2007–2013, this paper projects a micro and accurate description of the competing behaviors of prefectural-level city governments. Finally, from a research perspective, this paper contributes practical value by examining the strategic interactions in government healthcare spending behaviors, and shows the short- and long-term effects of fiscal decentralization and the strategic competition for space in government healthcare spending.
/ Journals / Journal of Finance and Economics
Journal of Finance and Economics
LiuYuanchun, Editor-in-Chief
ZhengChunrong, Vice Executive Editor-in-Chief
YaoLan BaoXiaohua HuangJun, Vice Editor-in-Chief
Competition among Local Governments: Healthcare Expenditure under Fiscal Decentralization
Journal of Finance and Economics Vol. 44, Issue 06, pp. 94 - 108 (2018) DOI:10.16538/j.cnki.jfe.2018.06.007
Summary
References
Summary
[1] Feng H B, Chen X J. An Study on Fiscal Equalization of Public Medical and Health Expenditure -- A Two-VariableThiel Index Analysis of Guangdong Province [J]. Finance & Trade Economics, 2009(11):49-53. (In Chinese)
[2] Fu Y. Fiscal Decentralization, Governance and Non-Economic Public Goods Provision[J]. Economic Research Journal, 2010(8):4-15. (In Chinese)
[3] Guo Q W, Jia J X. The Tactical Interaction among Local Governments, their Competition in fiscal Expenditure，and Regional Economic Growth[J].Management World, 2009(10):17-27. (In Chinese)
[4] Jia J X. Empirical Study on the Intergovernmental Assignments of Public Revenue and Expenditure Responsibility and Local Public Services Equalization[J].China Soft Science, 2011(12):35-45. (In Chinese)
[5] Jia J X, Y S W. Fiscal Decentralization and Corporate Tax Incentives——An Analysis from Views of Local Government Competition [J].China Industrial Economics, 2016(10):23-39. (In Chinese)
[6] Li T, Zh Y A. A study on Expenditure Competition among Local Governments in China -Evidence from China's provincial panel data[J].Management World, 2009(2):12-22. (In Chinese)
[7] Li X, Hong G Z, Huang L X.The Mystery of Land Finance Growth in China:Tax-sharing Reform, Stragegic Interaciton of Land Finance[J].China Economic Quarterly, 2013, 12(3):1141-1160. (In Chinese)
[8] Lu M. Urban,Regional and National Development-The Present and Future of Spatial Political Economics[J]. China Economic Quarterly, 2017(04): 1499-1532. (In Chinese)
[9] Xiao H X, Liu L F. The Determinants of Government Health Spending in China:Based on Empirical Analysis of Chinese Province Panel Data[J].Journal of Graduate School of Chinese Academy of Social Sciences, 2013(2):44-52. (In Chinese)
[10] Xiao H X Liu L F Shao C X. The Optimal Size of Government Health Spending in China and its Fulfillment[J].Journal of Graduate School of Chinese Academy of Social Sciences, 2011(4):26-32. (In Chinese)
[11] Wang X J. Empirical analysis of the Equalization Level of Public Health Expenditure in China - A Quantitative Analysis Based on Regional differences[J].Finance & Trade Economics, 2009(2):46-49. (In Chinese)
[12] Wang X. Empirical Analysis on the Optimal Scale of Government Health Expenditure in China[J].Chinese Health Economics, 2013(11):47-48. (In Chinese)
[13] Zhang S X, Dai Y A.Heterogeneity, Fiscal Decentralization and Urban Economic Growth - Based on Panel Quintile Model [J].Journal of Financial Research, 2012(1):103-115. (In Chinese)
[14] Zhou L A. Governing China' s Local Officials :An Analysis of Promotion Tournament Model [J].Economic Research Journal, 2007(7):36-50. (In Chinese)
[15] Zhou Y H, Zong Q Q, Chen X M.Yardstick Competition among Local Municipal Governments over the Education Expenditure under Decentralized Fiscal System[J].Economic Research Journal, 2013(11):127-139. (In Chinese)
[16] Atella V，Belotti F，Depalo D，et al. Measuring spatial effects in the presence of institutional constraints：The case of Italian local health authority expenditure[J]. Regional Science and Urban Economics，2014，（49）： 232−241
[17] Besley T, Case A. Incumbent behavior: Vote-seeking, tax-setting, and yardstick Competition [J]. American Economic Review, 1995,85(1): 25-45.
[18] Caldeira E. Yardstick competition in a federation: Theory and evidence from China [J]. China Economic Review, 2012, 23(4):878-897.
[19]Chou W L. Explaining china's regional health expenditures using LM-type unit root tests [J]. Journal of Health Economics, 2007, 26(4):682.
[20] Elhorst J P，Fréret S. Evidence of political yardstick competition in France using a two-regime spatial Durbin model with fixed effects[J]. Journal of Regional Science，2009，48（5）： 931−951
[21]Elhorst J P，da Silva D F C，da Mota Silveira Neto R. A spatial economic model and spatial econometric analysis of population dynamics in Brazilian MCAs[R]. Conference Paper, Lisbon, Portugal，2015.
[22]Elhorst J P，da Silva D F C，da Mota Silveira Neto R. A spatial economic model and spatial econometric analysis of population dynamics in Brazilian MCAs[R]. Conference Paper, Lisbon, Portugal，2015.
[23]Greene W. Distinguishing between heterogeneity and inefficiency：Stochastic frontier analysis of the world health organization’s panel data on national health care systems[J]. Health Economics，2004，13（10）： 959−980.
[24]Gupta S，Verhoeven M. The efficiency of government expenditure：Experiences from Africa[J]. Journal of Policy Modeling，2001，23（4）： 433−467.
[25]Halleck Vega S，Elhorst J P. The SLX model[J]. Journal of Regional Science，2015，55（3）： 339−363.
[26]Lee L F，Yu J. Estimation of spatial autoregressive panel data models with fixed effects[J]. Journal of Econometrics，2010，154（2）： 165−185.
[27]LeSage J P，Pace R K. Introduction to spatial econometrics [M]. CRC Press/Taylor & Francis Group：London，2009.
[28]Matteo L， Matteo R. Evidence on the determinants of Canadian provincial government health expenditures：
1965–1991[J]. Journal of Health Economics，1998，17（2）： 211−228.
Cite this article
Peng Chong, Tang Erzi. Competition among Local Governments: Healthcare Expenditure under Fiscal Decentralization[J]. Journal of Finance and Economics, 2018, 44(6): 94-108.
Export Citations as:
For
ISSUE COVER
RELATED ARTICLES
