Intra‐provincial fiscal decentralization, relative wealth, and healthcare efficiency: Empirical evidence from China

Abstract

AbstractDecentralizing fiscal power to locally elected governments is often regarded as beneficial for public service efficiency. However, questions remain about whether decentralizing fiscal responsibilities work well in countries lacking political decentralization. In China, fiscal decentralization has significantly strengthened the role of local governments in the provision of healthcare services, but evidence of its efficiency effects is scarce. To cast light on this issue, this study investigates the relationship between intra‐provincial fiscal decentralization and the productive efficiency of healthcare services in China. Analysis of panel data for 2006–2017 suggests that expenditure and revenue decentralization from provincial to sub‐provincial governments significantly improves healthcare efficiency. Further analysis suggests that the positive impact of healthcare expenditure decentralization on healthcare efficiency may be stronger in wealthier provinces. These findings have important theoretical and practical implications.