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How does tax revenue sharing affect local government governance? Empirical evidence from Chinese cities

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  • Xu, Xinyu
  • Yang, Xiubo
  • Lian, Hongping

Abstract

High-level government governance is the support and guarantee for achieving high-quality economic and social development. This study identifies the impact and mechanisms of tax revenue sharing on local government governance from theoretical and empirical perspectives. It is found that the increase of tax sharing ratio of city and county governments can trigger financial incentives and effectively improve the level of local government governance. At the same time, the increase of tax sharing ratio can also improve the public expenditure structure of local governments to enhance the level of local digital infrastructure construction so as to strengthen governance efficiency.

Suggested Citation

  • Xu, Xinyu & Yang, Xiubo & Lian, Hongping, 2024. "How does tax revenue sharing affect local government governance? Empirical evidence from Chinese cities," Finance Research Letters, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:finlet:v:64:y:2024:i:c:s1544612324005038
    DOI: 10.1016/j.frl.2024.105473
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    References listed on IDEAS

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