Abstract
The reform of China’s tax-sharing system in 1994 has not only had a profound heterogeneous impact on the control level of fiscal resources by local government but also might exert a negative effect on the sustainable development of tourism. Based on this hypothesis, this paper uses 1993–2018 data from 31 Chinese provinces to examine the dynamic relationship between China’s fiscal decentralization, income gap, urbanization, and tourism growth using a panel co-integration model. Our results show that there is a stable co-integration relationship between fiscal decentralization, income gap, and tourism growth. In general, the impact of fiscal decentralization and income gap on tourism development varies across regions. However, in most provinces, urbanization helps the development of tourism. Urbanization and fiscal decentralization also help reduce the income gap. This shows that the inter-regional government competition promotes not only the growth of tourism but also income equality. To achieve the sustainable development of tourism, China should not only take the advantage of local governments’ incentives for economic growth but also handle the income gap problem considering local conditions.
Highlights
China’s 1994 fiscal decentralization reform has led to a fiscal challenge faced by the local government: more public goods to provide with fewer revenue sources
In regions with higher fiscal autonomy, fiscal expenditure tends to be used to promote the development of tourism
In provinces with low fiscal autonomy, fiscal decentralization plays a significant role in promoting social justice rather than the development of tourism
Summary
China’s 1994 fiscal decentralization reform has led to a fiscal challenge faced by the local government: more public goods to provide with fewer revenue sources. China’s fiscal decentralization reform has promoted the local economy and increased the rural population’s incomes. The income gap between urban and rural areas displays substantial cross-region disparity These will directly affect the development strategy and potential of tourism development in various regions. In general, most existing studies used cross-sectional data or time-series data for regression analysis, and the use of panel data to investigate the interaction between the three factors, in the long run, is still rare in the existing literature As these questions are of great significance to China in reducing the urban-rural gap and promoting the sustainable development of the tourism industry, this paper uses the panel data from 1993–2018 to conduct quantitative analysis on the dynamic relationship between the three factors
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