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

Liangliang Liu () and Wenqing Zhang ()
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Liangliang Liu: Nanjing University of Finance & Economics
Wenqing Zhang: University of Science and Technology of China

Economic Change and Restructuring, 2022, vol. 55, issue 3, No 23, 1953-1971

Abstract: 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.

Keywords: Vertical fiscal imbalance; Science and technology spending; Intergovernmental fiscal transfers; Chinese provinces (search for similar items in EconPapers)
JEL-codes: H77 P11 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10644-021-09373-1

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