This paper divides both the provincial specific transfer payment and the general public budget expenditure into four categories: science & education, social security & medical care, economic construction, and agriculture, which is based on the documents of China’s specific transfer payment. Then it uses the provincial and municipal panel data to verify the mechanism of the specific transfer payment through the comprehensive trade-off of income effect, matching effect and crowding effect. The study finds that the specific transfer payments of science & education and social security & medical care significantly reduce the corresponding science & education expenditure and social security & medical care expenditure. While the specific transfer payments of economic construction and agriculture significantly increase the corresponding economic construction expenditure and agricultural expenditure. The specific transfer payment of economic construction also significantly stimulates the other three types of the local expenditure. There are different operational logics in the specific transfer payments of science & education and agriculture. When the crowding effect is greater than the income effect, the special transfer payment of science & education will stimulate the expenditure on economic construction while reducing the local expenditure on science and education. When the income effect is greater than the crowding effect, the specific transfer payment of agriculture will be driven by the economic construction expenditure and eventually increase the local agricultural expenditure.
Does Intergovernmental Transfer Payment Stimulate the Local Special Expenditure? A Theoretical Mechanism and Its Empirical Test Based on Documents and Provincial and Municipal Data
Journal of Finance and Economics Vol. 45, Issue 10, pp. 21 - 34 (2019) DOI:10.16538/j.cnki.jfe.2019.10.002
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Cite this article
Yao Dongmin, Li Jing, Chen Yijing. Does Intergovernmental Transfer Payment Stimulate the Local Special Expenditure? A Theoretical Mechanism and Its Empirical Test Based on Documents and Provincial and Municipal Data[J]. Journal of Finance and Economics, 2019, 45(10): 21-34.
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