Measurement of Local Fiscal Sustainability

Abstract

As a foundation and important pillar of national governance, timely assessment of local fiscal sustainability can identify fiscal risks and pressures, furthermore, it can prevent fiscal risks from causing systemic financial risks and provide a stable financial and fiscal environment for high-quality economic development and building a new development pattern. Based on the panel data of 246 prefecture-level cities from 2008 to 2019, this paper firstly elaborates on local fiscal sustainability at the theoretical level, secondly constructs a fiscal reflection function to empirically measure local fiscal sustainability, and finally uses the DEA-Malmquist index method to measure the fiscal expenditure efficiency value fe,and uses fe to measure the local government's The "effective fiscal space" of local governments in China is measured with the help of fe. The measurement results show that most regions in China have high fiscal space, i.e. most local governments have strong fiscal sustainability.