Evaluating the Allocative Efficiency of Fiscal Transfer Payment Funds: A County-Level Fiscal Expenditure Needs Perspective

Fiscal transfer payments are a core institutional arrangement for adjusting the distribution of fiscal resources between the central and local governments and promoting balanced regional development. Their allocative efficiency bears directly on the quality and effectiveness of primary-level public finance and the modernization of national governance. Existing studies have largely focused on the regional equalization objective and economic growth effects of transfer payments, with relatively limited attention to their alignment with local expenditure needs. From the perspective of county-level fiscal expenditure needs, this paper uses detailed county-level fiscal data from China for 2016–2021 to construct an empirical framework for evaluating the allocative efficiency of fiscal transfer payment funds. The empirical results show that there remains room to improve the extent to which transfer payments meet county-level fiscal expenditure needs, and that in some counties this is accompanied by an expansion in the scale of expenditures. The targeted allocation of special-purpose transfer payments and local governments' path dependence on transfer payments are key factors affecting improvements in the allocative efficiency of transfer payment funds. This paper systematically investigates the overall allocative efficiency of fiscal transfer payment funds and the directions for its improvement, deepens the theoretical understanding of the logic underlying the allocation of fiscal funds across multiple levels of government, and provides theoretical and practical references for optimizing the transfer payment system and rationalizing central–local fiscal relations.