Competition or Cooperation:The Choice of Governments'Behavior under Vertical Fiscal Relation Reform
Intergovernmental vertical fiscal competition and cooperation are important issues in the research of vertical fiscal relations.China's initiation of the Province-Managing-County(PMC)reform in 2004 provided a favorable opportunity to explore the dynamic choices of intergovernmental vertical fiscal competition and cooperation under the reform of vertical fiscal relations.Since the PMC reform was not uniformly implemented but rather piloted in certain provinces,there are both reformed and non-reformed counties under the same prefecture-level city.This situation provides an excellent opportunity to investigate the decision-making of intergovernmental vertical fiscal competition or cooperation under the changes in vertical fiscal relations.Before and after the reform,the fiscal affairs of non-reformed counties were under the direct jurisdiction of prefecture-level cities.If prefecture-level cities where these counties were located initiated pilot reforms of the PMC,these non-reformed counties became what we term"remaining non-reformed counties."Since prefecture-level cities might incur financial losses due to the reform,prefecture-level cities no longer had direct fiscal jurisdiction over reformed counties,nor influence over their fiscal interests.However,the fiscal affairs of remaining non-reformed counties continued to be directly managed by prefecture-level cities.Therefore,prefecture-level cities,in addition to their own efforts,might engage in vertical fiscal competition or cooperation with remaining non-reformed counties to compensate for their own interests,thus potentially impacting the fiscal situation of these counties.Based on this premise,the dynamic choice problem of intergovernmental vertical fiscal competition or cooperation can be explored under the reform of vertical fiscal relations.To analyze this,we utilized county-level panel data from 1997 to 2009 and constructed a DID model to conduct empirical analysis.The findings suggest that when prefecture-level cities suffered financial losses due to the PMC reform,fiscal expenditures and transfer payments of non-reformed counties still under their jurisdiction tended to increase.This indicates that prefecture-level cities might provide assistance to remaining non-reformed counties to achieve cooperation for mutual benefits.This result was robust and confirmed through various robustness tests including additional control variables,PSM-DID,and placebo tests.Heterogeneity analysis revealed that prefecture-level cities in situations characterized by"strong prefecture-level cities and weak counties"and prefecture-level cities with strong revenue-generating capabilities from governmental funds tended to provide greater assistance to remaining non-reformed counties.Prefecture-level cities primarily relied on special transfer payment tools rather than general transfer payments to provide assistance to remaining non-reformed counties.
vertical fiscal relationshipPMC reformfiscal competition and cooperation
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万方数据
