Decentralized education spending and regional disparities: Evidence from Chinese counties 1997–2001

Chinese fiscal reforms in the past decade have recentralized government revenues, making lower governments more dependent on central and provincial funds. At the same time, decentralization in spending has obliged the county governments to take primary responsibility for financing compulsory education. That vertical imbalance can lead to widening regional gap in education if the central government does not carry out effective redistributive fiscal transfers. This paper examines a data set that includes all the counties of mainland China from 1997 through 2001 and finds that regional economic and budgetary disparities did carry over to education spending. The author would like to thank Professor Alice Cooper and the anonymous reviewers for invaluable suggestions.