Fiscal Disparity across Chinese Cities

Using county level data from 2006, we in this paper look at the fiscal disparity as measured by the CV in per capita expenditure at city level. We try to discern factors contributing to this measure of fiscal disparity. We find that expenditure disparity exhibits a trend of convergence. We also find that expenditure disparity is determined by revenue disparity, and would be worsening with the disparities in tax rebate and special transfer. Other factors include economic structure as well as extent of fiscal decentralization. Therefore, in order to reduce disparity in expenditure, a comprehensive policy framework is needed.

Key Words: Fiscal Disparity, City, Urban, CV