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Can 'tight living' promote local government to improve the efficiency of fiscal expenditure?: Evidence from the VAT Reform in China

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  • Chun Wang

Abstract

This paper analyses the comprehensive and sub-item fiscal expenditure efficiency data of 266 prefecture-level cities in China from 2006 to 2019. It uses the DID method to empirically examine the impact of fiscal pressure on local fiscal expenditure efficiency The research finds that: 1) the nationwide promotion of the pilot program of 'replacing business tax with VAT' has reduced local financial resources, increased financial pressure, and increased the efficiency of local government fiscal expenditures Still, the expenditure structure has mostly stayed the same; 2) the efficiency improvement effect of fiscal pressure in eastern regions and developed secondary industries is more significant; 3) these findings are crucial to revealing the impact of China's 'pressure-type' fiscal incentives on fiscal expenditure efficiency and even local government behaviour.

Suggested Citation

  • Chun Wang, 2024. "Can 'tight living' promote local government to improve the efficiency of fiscal expenditure?: Evidence from the VAT Reform in China," International Journal of Markets and Business Systems, Inderscience Enterprises Ltd, vol. 5(1), pages 74-90.
    • Handle: RePEc:ids:ijmabs:v:5:y:2024:i:1:p:74-90
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