This study analyzes the effect of fiscal decentralization on health outcomes in China using a panel data set with nationwide county-level data. We find that counties in more fiscal decentralized provinces have lower infant mortality rates compared to those counties in which the provincial government retains the main spending authority, if certain conditions are met. Spending responsibilities at the local level need to be matched with county government's own fiscal capacity. For those local governments that have only limited revenues, their ability to spend on local public goods such as health care depends crucially upon intergovernmental transfers. The findings of this study thereby support the common assertion that fiscal decentralization can indeed lead to more efficient production of local public goods, but also highlights the necessary conditions to make this happen.
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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number
111.
Length: Date of creation: Jul 2007 Date of revision: Publication status: Published in IDE Discussion Paper. No. 111. 2007.7 Handle: RePEc:jet:dpaper:dpaper111
Find related papers by JEL classification: H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Health, Education, and Welfare I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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