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Vertical fiscal imbalance and government spending on science and technology in China

Author

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  • Liangliang Liu

    (Nanjing University of Finance & Economics)

  • Wenqing Zhang

    (University of Science and Technology of China)

Abstract

Evaluating the influencing factors of government spending on science and technology (S&T) at the system level has become a topic of focus in high-quality economic development. However, the existing literature has not yet explored whether and how vertical fiscal imbalance (VFI) affects government spending on S&T. In this work, we aim to address this gap. Using China’s panel data at the province level from 1998 to 2018, we empirically examine the influence of VFI on government spending on S&T by the fixed effect, mediating effect, and moderating effect models. We find that VFI substantially inhibits government spending on S&T, but this effect has significant regional and temporal heterogeneities. We further find that VFI indirectly affects government spending on S&T through intergovernmental fiscal transfers (IFTs), and the negative influence of VFI on government spending on S&T depends on IFTs. These findings give political references to deepen the fiscal reform, promote the local government investment in S&T, and implement innovation-driven development strategies.

Suggested Citation

  • Liangliang Liu & Wenqing Zhang, 2022. "Vertical fiscal imbalance and government spending on science and technology in China," Economic Change and Restructuring, Springer, vol. 55(3), pages 1953-1971, August.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:3:d:10.1007_s10644-021-09373-1
    DOI: 10.1007/s10644-021-09373-1
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    More about this item

    Keywords

    Vertical fiscal imbalance; Science and technology spending; Intergovernmental fiscal transfers; Chinese provinces;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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