Intra-Provincial Fiscal Disparities And The Role Of Provincial Fiscal Transfer System In China: A Case Study Of Henan Province

Abstract

This study seeks to explore intra-provincial fiscal disparities at the county level in Henan province and the extent to which the undesirable fiscal inequalities can be traced to the provincial fiscal transfer system. It tests the equalization effects of provincial-local transfers by decomposing the Gini coefficient by revenue sources. The primary findings are that only general-purpose transfers (including both equalization transfers and other general-purpose transfers) have an equalization effect, while both tax rebates and specific-purpose transfers have anti-equalization effects. In addition, the size of the general transfers’ equalization effect is too limited to mitigate the overall anti-equalization effect of total transfers. It also found that so-called equalization transfers have not shown stronger equalization effects than other general-purpose transfers; tax rebates’ anti-equalization effect is limited, but specific-purpose transfers’ anti-equalization effect is significant due to its rapid growth during the study period of 2001-2011.