How Does Fiscal Decentralization Affect Health Outcomes? Evidence from China.

Area of Science:

• Public Health
• Health Economics
• Health Policy

Background:

• The impact of fiscal decentralization on health outcomes lacks consensus, especially post-China's fiscal and taxation system reform.
• China's unique fiscal decentralization necessitates analysis of its effects on health outcomes before and after the reform.

Purpose of the Study:

• To analyze the impact of fiscal decentralization on health outcomes in China.
• To evaluate these impacts before and after the new round of fiscal and taxation system reform.

Main Methods:

• Utilized panel data from 2007-2019 from China's Health Statistics Yearbook and Statistical Yearbook.
• Employed SYS-GMM with a dynamic model and lagged explained variables to analyze pre- and post-reform effects.
• Applied Hansen test for over-identification and AR(2) for serial correlation in residuals.

Main Results:

• Fiscal decentralization consistently showed a negative impact on health outcomes.
• Government health expenditures did not mediate the relationship between fiscal decentralization and health outcomes.
• Fiscal decentralization positively affected per capita government health expenditure pre-reform but negatively affected the expenditure share post-reform.

Conclusions:

• Fiscal decentralization leads to insufficient local government attention to public welfare and health investment in China.
• The recent fiscal and taxation reform has not improved the situation of inadequate government health investment.
• Recommendations include adjusting local official incentives, incorporating health into performance evaluations, optimizing expenditure structures, and enhancing health expenditure efficiency.