County Fiscal Burden and Local Public Services: The Impact of the Rural Tax Reform
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| Title | County Fiscal Burden and Local Public Services: The Impact of the Rural Tax Reform
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| Author | Li-An Zhou and Yi Chen |
| Organization | Guanghua School of Management, Peking University ; School of Economics, Peking University |
| Email | zhoula@gsm.pku.edu.cn; cy_econ@pku.edu.cn |
| Key Words | Rural Tax Reform; county fiscal burden; public services |
| Abstract | Using the county-level panel data from 1997 to 2005, this paper estimates the effect of the rural tax reform on the county fiscal burden and the provision of local public services. Difference-in-Differences (DID) with fixed effects has been applied to identify the causal effects of the reform. Regression results show that the reform significantly decreases the county fiscal income per capita and increases per capita fiscal expenditure, thus increasing the county fiscal burden. We also identify a lagging effect of the reform: the negative effect does not appear immediately after the reform, but comes into being two years later and turns larger as time goes on. We also find that counties in the western region are hit most dearly by the reform. The fiscal burden worsened by the rural tax reform does not affect the per capita expenditure on physical construction and administration, but leads to the significant decline in student enrollment in primary and high schools. |
| Serial Number | WP46 |
| Time | 2011-02-14 |
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