Abstract
Based on panel data covering the period from 2003 to 2012 in China’s 281 prefecture-level cities, we use superefficiency SBM model to measure regional financial efficiency and empirically test the spatial effects of fiscal decentralization on regional financial efficiency with SDM. The estimated results indicate that there exist significant spatial spillover effects among regional financial efficiency with the features of time inertia and spatial dependence. The positive promoting effect of fiscal decentralization on financial efficiency in local region depends on the symmetry between fiscal expenditure decentralization and revenue decentralization. Additionally, there exists inconsistency in the spatial effects of fiscal expenditure decentralization and revenue decentralization on financial efficiency in neighboring regions. The negative effect of fiscal revenue decentralization on financial efficiency in neighboring regions is more significant than that of fiscal expenditure decentralization.
Highlights
Improving financial efficiency via financial innovation is an important way to break the limitation of financial resource
Considering the fiscal decentralization system, strategic competition caused by public policy spillover and “free rider” behavior further enhance the spatial correlation of financial efficiency and financial development among regions; we find that it is necessary to introduce the interactive dependencies among regions into the spatial econometric analysis framework, to reflect the spatial spillover effects of financial development under the fiscal decentralization system by constructing a spatial econometric model
Comparing the values of R2 and Log-likelihood of Spatial Durbin Model (SDM) model and dynamic Spatial Durbin Model (DSDM) model, we find that the fitting degree of SDM model is higher than that of DSDM model, so the following analysis is mainly based on the econometric results of SDM model
Summary
Improving financial efficiency via financial innovation is an important way to break the limitation of financial resource. We attempt to use China’s prefecture-level city panel data covering the period from 2003 to 2012 to measure Chinese financial efficiency, placing fiscal decentralization and financial efficiency into a united analytical framework, to explore the spatial external effects of fiscal decentralization on regional financial efficiency by using spatial econometric models, that is, the spatial correlations among regional competition of financial efficiency and the relationship between regional financial efficiency and agglomeration under fiscal decentralization system In this fashion, we hope to make the following four key contributions to the literature.
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