Impact of budget performance management reform on local fiscal relief

Abstract

Budget performance management is crucial for strengthening fiscal revenue and expenditure management, enhancing the efficiency of fiscal fund utilization, and deepening the fiscal and tax system reform. Based on the quasi-natural experiment of budget performance management reform and utilizing data from 30 provinces spanning the years 2001–2021, this study employs a multi-temporal difference-in-differences model to investigate the mechanism and effects of budget performance management reform on local government fiscal pressure from both theoretical and empirical perspectives. The results reveal that budget performance management reform has a significant effect on relieving local fiscal pressure. Parallel trends and series of robustness tests support the results. Budget performance management reform impacts fiscal pressure through fiscal expenditure efficiency, government expenditure scale, and fiscal transparency. The heterogeneity analysis results indicate that the impact advancing budget performance management reform on fiscal pressure is affected by regional environment, fiscal decentralization areas, and municipal debt areas. The research results provide direct evidence of the effect of budget performance management on fiscal pressure, providing policy insights for local governments to alleviate the contradiction between fiscal revenue and expenditure.