Fiscal and tax policies are the institutional guarantee for macroeconomic operation,playing a significant role in building a united national market and promoting Chinese path to modernization.Adopting the price method assessing market integration at the prefecture-level cities from 2009 to 2020,this paper builds a difference-in-differences model with an intensity index based on 2016 value-added tax reform being an exogenous shock,to investigate the effect of fiscal incentives on market integration.The results indicate that the fiscal incentives generated by the increase in tax sharing ratio are conducive to market integration,which is more pronounced in cities with high marketization index,high-level market integration,and larger population.The mechanism analysis shows that increasing the proportion of tax sharing encourages local governments to engage in tax competition and fiscal expenditure competition.In addition,tax competition has a negative impact on market integration,while fiscal expenditure competition has a positive effect.Further analysis indicates that an increase in the proportion of tax sharing will contribute to achieving common prosperity in the process of building a unified national market.Therefore,the governments should reform the performance evaluation system and standardize local governmental behaviors in tax competition,accelerate the transformation of government functions,establish a rule of law approach to government governance and a service government,and introduce such policy recommendations as improving the tax sharing system and optimizing fiscal incentive mechanisms.
tax sharingfiscal incentivestax competitionfiscal expenditure competitionmarket integrationunified national market
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