IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i24p11100-d1546664.html
   My bibliography  Save this article

Chinese-Style Fiscal Decentralization, Government Innovation Investment, and Regional Innovation

Author

Listed:
  • Yujie Hu

    (Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences (CAAS), Beijing 100081, China)

  • Yanlei Gao

    (Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences (CAAS), Beijing 100081, China
    Center for Strategic Studies, Chinese Academy of Agricultural Sciences (CAAS), Beijing 100081, China)

  • Xiudong Wang

    (Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences (CAAS), Beijing 100081, China
    Center for Strategic Studies, Chinese Academy of Agricultural Sciences (CAAS), Beijing 100081, China)

Abstract

Innovation is a key driver of high-quality economic development. Building strong relationships between central and local financial authorities, with a clear division of powers and responsibilities and well-coordinated fiscal resources, is both practical and significant. Such collaboration enhances the government’s ability to support scientific and technological innovation, leading to improved outcomes. In this study, multiple mechanisms of fiscal decentralization and government innovation investment in regional innovation were explored based on Chinese-style fiscal decentralization, the theory of fiscal decentralization, and the innovation system. Provincial panel data from 2008 to 2021 were used to examine both the direct effect of fiscal decentralization and the mediating effect of government innovation investment on regional innovation. The results show that fiscal decentralization distorts the government’s fiscal expenditure behavior, significantly inhibiting regional innovation enhancement. The results of a mechanism analysis demonstrate that fiscal decentralization weakens the government’s support and guidance for scientific and technological innovation, but increasing innovation investment can offset this effect and enhance the regional innovation level. Overall, fiscal decentralization negatively affects regional innovation by inhibiting the government’s innovation investment. To address these challenges, the fiscal system requires deeper reform, adjusting the relationship between central and local governments. Additional measures should include improving the government’s performance appraisal system, guiding local authorities to adopt appropriate performance perspectives, increasing fiscal expenditure and the government’s role in scientific and technological innovation, and enhancing independent scientific and technological innovation.

Suggested Citation

  • Yujie Hu & Yanlei Gao & Xiudong Wang, 2024. "Chinese-Style Fiscal Decentralization, Government Innovation Investment, and Regional Innovation," Sustainability, MDPI, vol. 16(24), pages 1-22, December.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:24:p:11100-:d:1546664
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/24/11100/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/24/11100/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Christopher J. Waller & Thierry Verdier & Roy Gardner, 2002. "Corruption: Top Down or Bottom Up?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 688-703, October.
    3. Gordon Crawford, 2008. "Decentralization and the Limits to Poverty Reduction: Findings from Ghana," Oxford Development Studies, Taylor & Francis Journals, vol. 36(2), pages 235-258.
    4. Feltenstein, Andrew & Iwata, Shigeru, 2005. "Decentralization and macroeconomic performance in China: regional autonomy has its costs," Journal of Development Economics, Elsevier, vol. 76(2), pages 481-501, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Lei & Luo, Changtuo, 2023. "Does administrative decentralization promote outward foreign direct investment and productivity? Evidence from China," Economic Modelling, Elsevier, vol. 124(C).
    2. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2016. "Fiscal Federalism, Decentralization, And Economic Growth: A Meta-Analysis," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1445-1463, July.
    3. Sidra Naeem & Rana Ejaz Ali Khan, 2021. "Fiscal Decentralization and Gender Equality in Developing Economies: Dynamics of Income Groups in Economies and Corruption," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(9), pages 745-761, September.
    4. Kayode Olaide & Beatrice D. Simo-Kengne & Josine Uwilingiye, 2022. "Sustainable Development–Fiscal Federalism Nexus: A “Beyond GDP” Approach," Sustainability, MDPI, vol. 14(10), pages 1-37, May.
    5. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    6. Daniel Kaufmann & Gil Mehrez & Tugrul Gurgur, 2019. "Voice or public sector management? An empirical investigation of determinants of public sector performance based on a survey of public officials," Journal of Applied Economics, Taylor & Francis Journals, vol. 22(1), pages 321-348, January.
    7. Mr. Ehtisham Ahmad & Li Keping & Mr. Raju J Singh & Mr. Thomas J Richardson, 2002. "Recentralization in China?," IMF Working Papers 2002/168, International Monetary Fund.
    8. Emeka Nkoro & Godly Otto, 2023. "Fiscal Federalism and Economic Development in Nigeria: An Econometric Analysis," International Journal of Economic Sciences, European Research Center, vol. 12(1), pages 127-145, May.
    9. Makreshanska, Suzana & Petrevski, Goran, 2015. "Fiscal Decentralization and Inflation in Central and Eastern Europe," MPRA Paper 77596, University Library of Munich, Germany, revised 16 Mar 2017.
    10. Mitchell, Austin M. & Yin, Weiwen, 2022. "Political centralization, career incentives, and local economic growth in Edo Japan," Explorations in Economic History, Elsevier, vol. 85(C).
    11. repec:rre:publsh:v:37:y:2007:i:2:p:109-19 is not listed on IDEAS
    12. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo.
    13. Soonae Park & Min-Gean Park & Kyung-Min Nam, 2019. "Growth effects of fiscal decentralization with weak economic motivation: the case of South Korea," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 399-436, December.
    14. Benjamin Otchere-Ankrah, 2021. "Local Revenue Mobilization and Composite Budget Implementation in Ghana: Examining the Challenges," Journal of Public Administration and Governance, Macrothink Institute, vol. 11(4), pages 115129-1151, December.
    15. Sheng Yang & Ling-Yun He, 2015. "Oil price shocks, road transport pollution emissions and residents' health losses in China," Papers 1512.01742, arXiv.org.
    16. Alfonso Mendoza‐Velázquez & Mónica Rubio‐García & Luis D. Conde‐Cortés, 2022. "Fiscal decentralization and regional economic growth: Evidence from Mexico since the 2000s," Public Budgeting & Finance, Wiley Blackwell, vol. 42(1), pages 45-65, March.
    17. Mohammad Reza Farzanegan & Tim Mennel, 2012. "Fiscal decentralization and Pollution: Institutions Matter," MAGKS Papers on Economics 201222, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    18. Emeka Nkoro & Godly Otto, 2023. "Fiscal Federalism and Economic Development in Nigeria: An Econometric Analysis," International Journal of Economic Sciences, European Research Center, vol. 12(1), pages 144-162, May.
    19. Longjin Chen & Jian Huang & Jianjun Li, 2017. "Fiscal Decentralization, Satisfaction with Social Services, and Inequality Under the Hukou System," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(1), pages 377-394, May.
    20. Tristan Canare, 2021. "Decentralization and Development Outcomes: What Does the Empirical Literature Really Say?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 237(2), pages 111-151, June.
    21. Jianing Zhou & Fan Yang, 2023. "Impact of Chinese-Style Fiscal Decentralization on Urban–Rural Integration: Based on Factor Allocation," Sustainability, MDPI, vol. 15(2), pages 1-21, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:16:y:2024:i:24:p:11100-:d:1546664. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.