Fiscal Policy and Social Equity: The Redistributive Effects of Government Spending on Inequality
DOI:
https://doi.org/10.14419/bh7rgd11Keywords:
Fiscal Policy; Income Inequality; China; Fiscal Incidence; Benefit Incidence; Pan-El Data; Redistribution; Education Expenditure; Healthcare Expendi-ture; Social Security; Intergovernmental TransfersAbstract
The paper analyzes the redistributive impact of government expenditures on income inequality in Chinese provinces through a synthesis of fiscal incidence analysis, benefit incidence approaches, and panel econometric analysis. Based on provincial expenditure data for 2019-2021 and household-level inequality indicators, the analysis assesses the impacts of education, healthcare, social security expenditure, and intergovernmental transfers on driving market and post-fiscal income distribution. Findings indicate that the fiscal policy has a strong equalizing role in that the Gini coefficient of 0.467 (market income) is reduced to 0.414 when direct transfers are added and to 0.384 when in-kind education and health benefits are subsequently added. The results of benefit incidence suggest that education and healthcare expenditure are quite pro-poor, whereas social security-ty and welfare are almost neutral based on institutional fragmentation. Fixed-effects regressions establish the strong negative association between education and health spending and inequality, and a weak and not statistically significant association between welfare spending and inequality. Intergovernmental transfers show the significant equalization effect, which displays the significance of central-local fiscal coordination. Taken together, the findings confirm the multi-channel ability of the Chinese fiscal system to diminish inequality, but also point to the existence of structural constraints to redistributive possibilities, notably in the welfare sector. Policy proposals aim at reinforcing human capital expenditure, enhancing healthcare equity, reforming disjointed welfare, and allocating transfers to promote social equity.
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