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Impact of fiscal transparency on local fiscal revenue and expenditures: Evidence from a natural experiment

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  • Liu, Shengwang
  • Chen, Xin

Abstract

This study examines the impact of fiscal transparency on local fiscal revenue and expenditures through a natural experiment conducted in Jiaozuo, China. Using a synthetic control approach, we analyze data from 1984 to 2008, considering factors such as industrial structure, population, and economic development. The introduction of fiscal transparency reforms in Jiaozuo in 1998 initially led to a significant reduction in per capita fiscal revenue and expenditures, followed by a recovery and growth over time. The findings indicate that fiscal transparency initially restrains fiscal revenue and expenditures due to enhanced scrutiny and improved governance. However, over the long term, it stimulates economic growth and increases fiscal revenue and expenditures. This study highlights the dual impact of fiscal transparency: it initially restricts inappropriate fiscal behaviors while fostering economic growth and fiscal health in the longer term. The case of Jiaozuo provides valuable insights for other regions and countries, especially in the postepidemic era, underscoring the importance of fiscal transparency in improving government accountability and economic resilience.

Suggested Citation

  • Liu, Shengwang & Chen, Xin, 2024. "Impact of fiscal transparency on local fiscal revenue and expenditures: Evidence from a natural experiment," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008584
    DOI: 10.1016/j.frl.2024.105828
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