Revenue Effect and Substitution Effect of Local Governments'Fiscal Science and Technology Budget
Examining the factors that influence local governments'budgetary allocations towards science and technology is essential for high-quality technological advancement.This paper utilizes the concepts of the revenue effect and the substitution effect to construct a theoretical framework analyzing how the fiscal revenue of local governments influences their budgeting decisions for science and technology expenditure.The revenue effect is described as the decrease in fiscal technology spending directly caused by a decline in fiscal revenue,as fiscal science and technology budget is linked to the governmental revenue.The substitution effect occurs with a drop in fiscal revenue.Due to the local governments'autonomy in the budget for fiscal science and technology expenditure,a drop in fiscal revenue forces local governments to give precedence to more rigid expenditure areas over science and technology,consequently reducing its proportion in the general public budget.An important focus of this paper is the county-to-district reform,which involves reclassifying counties under the jurisdiction of municipalities or prefecture-level cities as districts.To overcome the endogeneity problem caused by the reciprocal causation between fiscal science and technology expenditure and fiscal revenue,this paper considers the county-to-district reform as an external shock affecting fiscal revenue and utilizes non-balanced panel data from 262 cities from 2010 to 2018.It applies the propensity score matching and multiple time points difference-in-differences(PSM-DID)method to confirm the revenue and substitution effects,considering that the county-to-district reform is a gradual reform.Besides,this paper uses the Shapley value decomposition method for a detailed quantitative analysis and identifies the dynamic changes of these two effects and their heterogeneity in cities with different characteristics.The research findings indicate that when fiscal revenue decreases,the change in fiscal revenue directly leads to a reduction in fiscal science and technology expenditure(revenue effect).Simultaneously,economic development expenditures and basic livelihood expenditures will substitute for fiscal science and technology expenditure,resulting in a decrease in the proportion of fiscal science and technology expenditure in general public budget expenditures(substitution effect).After conducting various robustness checks and placebo tests on PSM methods,policy characteristics of county-to-district reform and regression methods,the conclusions still hold.The study also reveals temporal dynamics and regional disparities in these effects.It shows that the substitution effect lessens over time and predominantly affects cities with lower economic development and higher developmental imbalance.However,the revenue effect exhibits the opposite trend,whose explanatory power increases over time and plays a leading role in cities with higher and more balanced economic development.This paper emphasizes the vital importance of maintaining a stable fiscal revenue for local governments.It highlights that focusing on stable growth and public welfare in budget allocations for science and technology is crucial for ensuring ongoing local government investment in this area.The contributions of this paper lie in two aspects.Firstly,it departs from the existing research paradigm that primarily focuses on specific institutional policies.Instead,this paper constructs a comprehensive logical framework within the government budget system,centered around the pathways of revenue effect and substitution effect,offering insights into the mechanisms by which these effects influence fiscal science and technology expenditure budgets through quantitative decomposition,and expanding the research perspective of fiscal science and technology expenditure budget.Secondly,after confirming the negative impact of the county-to-district reform on fiscal revenue in prefecture-level cities,this paper uses causal inference methods to verify the negative effect of this reform on science and technology expenditure budget,thus finally confirming the theoretical mechanism proposed in this paper.
Science and Technology Expenditure BudgetRevenue EffectSubstitution EffectCounty-to-District ReformSharpley Value Decomposition
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