Abstract: Health status is an important indicator of measuring the level of one country’s economic and social development. There has been a huge controversy over the impact of fiscal decentralization on health outcome. Though there is increasing research on this area in the English literature, few studies investigate the Chinese experience. Using mortality as health indicator and constructing provincial fiscal decentralization indicators, this paper investigates the impact of fiscal decentralization on health status drawing on China’s provincial panel dataset from 1995 to 2009. The main findings include: (1) China’s fiscal decentralization doesn’t lead to positive health outcome, no matter from the aspect of revenue decentralization or expenditure decentralization. (2) The degree of fiscal dependence of province partly offsets the adverse effect of fiscal decentralization on health outcome. (3) The intergovernmental transfers from provincial governments to sub-provincial governments improve health outcome, but this positive effect decreases with the improvement of the degree of expenditure decentralization. Finally, this paper offers some explanations for the main findings according to Three-tier principal-supervisor-agent theory and Leviathan hypothesis in the Chinese context and generates some policy implications.
Keywords: Fiscal Decentralization, Health, Fiscal Revenue, Fiscal Expenditure
source:Finance & Trade Economics ,No11,2013