Institutional inertia, local leadership turnover, and changes in the structure of fiscal expenditure

Dongmin Yao,Kai Yu,Yongyi Zhu

doi:10.1186/s40711-021-00149-8

Dongmin Yao, Kai Yu + Show 1 more

Open Access

https://doi.org/10.1186/s40711-021-00149-8

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Abstract

Taking the perspective of local party and government leadership change and using L-kurtosis to analyze provincial panel data in China from 1996 to 2018, this article identifies the structural change pattern of fiscal expenditures. We find that economic construction, science, education, culture, and health expenditures conform to the punctuated equilibrium pattern, while public security expenditures conform to the gradualism pattern. For expenditures under the punctuated equilibrium pattern, the longer the current local leader’s tenure is, the greater the friction with institutional inertia, and the larger the deviation from the average expenditure structure during the previous local leader’s tenure; however, for expenditures under the gradualism pattern, the local leader factor does not have a significant effect. This article also discusses the motivations of new local leaders for adjusting their expenditure structure. In terms of the proportion of economic development expenditures, in targeting expenditures, new leaders are more likely to “strive for the upper ends of the country,” while the expenditures for science, education, culture, and health are targeted to “converge to the national average.”

Highlights

Leaders of the local Communist Party of China (CPC) and the local government play a vital role in promoting local economic development, improving public services, and maintaining social order
The main findings of this paper are as follows: First, for expenditures under the punctuated equilibrium model, the longer the term of the local leader is, the greater the deviation from the expenditure structure of the previous leader; under the gradualism model, the changes in the tenure of local leaders will insignificantly affect fiscal expenditures
Leaders of the local parties and government play an essential role in raising the level of local economic development and improving the quality of public services

Summary

Introduction

Leaders of the local Communist Party of China (CPC) and the local government play a vital role in promoting local economic development, improving public services, and maintaining social order. Empirical strategy To verify the above hypothesis, based on China’s provincial panel data, this article constructs indicators, such as the change in the provincial fiscal expenditure structure and the deviation of the fiscal expenditure structure from the national average It uses the term length of the local leaders to measure the budget control of the local party and government leaders. For expenditures on economic construction and science, education, culture, and health, the change in the term length of the provincial party committee secretary has a significant positive impact on the deviation rate of the expenditure structure from that of his or her predecessor. We can see that for financial expenditures, such as science, education, culture, and health, the change in the length of the governor’s term has a significant negative impact on the absolute deviation rate from the national average. Because China carried out the reform of the project expenditure budget system in 2007, resulting in the discontinuity of the expenditure project data before and after that time, this article attempts to use the data after 2007 to ensure that existing empirical results are not affected by the budget reform policy (Table 6)

Method

Findings

Conclusion