The Impact of Fiscal Decentralization on Infrastructure Development: Based on a Dual Perspective of Quantity and Quality
Year: 2024
Type: article
Abstract: Currently, the focus of infrastructure development must shift from the pursuit of high growth to high-quality development. As a public good, comprehensive infrastructure development is inextricably linked to the government's financial contribution. This paper uses a provincial panel data set comprising 30 provinces (Tibet is excluded due to incomplete data) from 2005 to 2021, measures fiscal decentralization indicators based on two perspectives: revenue decentralization and expenditure decentralization, and examines the impacts on the quantity and quality of infrastructure respectively. Furthermore, the mechanism is investigated from the perspective of fiscal pressure, and a series of endogeneity, robustness, and heterogeneity are examined. The results demonstrate that fiscal decentralization exerts a positive influence on the quantity of infrastructure, yet a negative impact on its quality. This conclusion remains robust following a series of robustness tests and endogeneity analyses. The mechanism of fiscal decentralization, as evidenced by the significant alleviation of fiscal pressure on the quantity of infrastructure, does not yield a similar effect on the quality of infrastructure. This results in disparate inputs from local governments. Additionally, quantile regressions demonstrate that the varying effects of fiscal decentralization on the quantity and quality of infrastructure are particularly pronounced at low to medium levels of quantity. This paper provides theoretical evidence for promoting fiscal system reform, which is conducive to enhancing the effectiveness of local government governance and playing a strategic, fundamental, and pioneering role in the overall national development of infrastructure.
Author: Zixi Zhao
Institution: Zhongnan University of Economics and Law
Language: English
Field: Social Sciences
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4405591633