Differences in Economic Development, Changes in the Fiscal System, and the Equalization of County-Level Fiscal Capacity: A Quantitative Analysis, 1953–2019

Drawing on county-level fiscal revenue and expenditure data for 1953–2019 manually collected and compiled from more than 2,500 newly published county and municipal gazetteers and other statistical sources, this paper uses indicators including the Gini coefficient, together with the relevant institutional context, to analyze the evolution of inequality in county-level fiscal capacity in the People's Republic of China. The study finds that the Gini coefficient for per capita fiscal revenue at the county level fluctuated substantially between 1953 and 2019, exhibiting a W-shaped pattern, and that its overall volatility was greater after the launch of reform and opening up than during the planned-economy period. By contrast, the Gini coefficient for per capita fiscal expenditure, which reflects the fiscal benefits accruing to local residents, was lower and followed a more stable trajectory. It has declined amid fluctuations since 1953 and reached a historical low following the 18th National Congress of the Communist Party of China. An analysis incorporating the history of changes in the fiscal system shows that although regional disparities in economic development increase inequality in fiscal revenue, fiscal institutions—including revenue assignment, fiscal remittances and subsidies, and transfer payment policies—have continuously reduced inequality in fiscal expenditure, thereby contributing to the equalization of county-level fiscal capacity and basic public services.