Does Fiscal Vertical Imbalance Enhance the Economic Resilience of Chinese Cities?

Qing Zhao () and Chih-Hung Yuan ()
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Qing Zhao: School of Economics and Commerce, University of Electronic Science and Technology of China Zhongshan Institute, Zhongshan 528402, China
Chih-Hung Yuan: School of Economics and Commerce, University of Electronic Science and Technology of China Zhongshan Institute, Zhongshan 528402, China

Sustainability, 2025, vol. 17, issue 7, 1-17

Abstract: This study constructs an econometric model and empirically examines the impact of fiscal vertical imbalance on local economic resilience using panel data from prefecture-level and above cities across China from 2007 to 2022. The findings show that fiscal vertical imbalance significantly enhances local economic resilience. A further mechanism analysis demonstrates that fiscal vertical imbalance effectively improves the adaptability and recovery capacity of local economies by increasing government investment, reducing tax burdens, and promoting industrial structure upgrading. Additionally, this study highlights that this positive effect is particularly pronounced in central and western regions and cities with lower administrative levels. The empirical results provide robust evidence to support China’s fiscal system reform, contributing to the sustainable development of regional economies.

Keywords: fiscal vertical imbalance; local economic resilience; government investment; tax burden; industrial structure upgrading (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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