Regional Fiscal Disparity and Efficiency across Chinese Provinces

Abstract

This paper investigates the regional fiscal disparity across Chinese provinces after 1994 when the tax system was changed. From the description analysis, it is found that fiscal transfer from the central to the local government is not enough for decreasing regional income disparity though some efforts are seen.

On the other hand, the regional disparity of fiscal revenue is serious. From the efficiency analysis by using Data Envelopment Analysis (DEA), the region which corrects fiscal revenue efficiently or inefficiently is clarified. Moreover, the paper shows that the mean of the efficiency score has decreased and it accelerates the expanding disparity of fiscal revenue. DEA calculation and its statistical tests suggest that the efficiency of fiscal expenditure and fiscal transfer across provinces is not changed during the sample period.

From these results, we suggest that it is necessary to improve the fiscal revenue ability of the local government more.