Fiscal decentralisation and technological innovation efficiency in China: an efficiency decomposition perspective

Abstract

ABSTRACT An effective evaluation of the factors affecting technological innovation efficiency (TIE) at the system level is an important focus in promoting high-quality economic development. Previous studies are extensively concerned with the relationship between fiscal decentralisation and TIE in recent years, but little attention has been paid to whether and how fiscal decentralisation affects TIE systematically from the perspective of efficiency decomposition. Using China’s panel data at the province level from 1998 to 2018, we explore this question by decomposing the TIE into scale efficiency and pure technical efficiency. Findings demonstrate that fiscal decentralisation has a positive and significant influence on TIE and scale efficiency, but has no significant influence on pure technical efficiency. The influences of fiscal decentralisation on TIE and its decomposition efficiency have evident regional heterogeneity. Fiscal decentralisation can improve TIE and scale efficiency by increasing fiscal expenditure on science and technology. These findings may aid policymakers in reasonably designing future innovation policies and the next-stage reform package.