Fiscal Revenue, Expenditure Structure Incentives, and the Provision of Livelihood-Oriented Public Services

There is broad consensus that the equitability and accessibility of public services must be enhanced. But how can we achieve this goal? Should we strengthen local fiscal capacity, or adjust the expenditure structure to provide incentives? This study constructs a spatial general equilibrium model to examine how fiscal revenue shocks shape the ways in which local governments provide public services. Using spatiotemporal big data on public welfare service stations from 2012 to 2020 and leveraging the exogenous fiscal shock induced by the collapse of international oil prices, this study empirically examines the effect of fiscal revenue on public service provision. The findings reveal that increased fiscal revenue significantly promotes the provision of livelihood-oriented public services; however, this improvement depends on whether regional fiscal capacity prioritizes meeting the basic requirements of productive public service construction. Only when productive expenditures are sufficiently guaranteed can local governments balance livelihood-oriented expenditures, gradually achieving the goal of optimizing the fiscal expenditure structure to prioritize people’s livelihoods and promote investment. This study promotes an understanding of the mechanisms underlying the unequal provision of public services in China and offers meaningful guidance for the design of public service policy.