Fiscal Inequality: The Distribution of Welfare Spending within China's Cities

• In Event: Social Welfare Provision in Non-democracies: Evidence from China

Abstract

Welfare inequality in China is a well-documented phenomenon. Structural segmentation exists between regions, provinces, and cities, with both formal economic policies and local conditions driving inequality in government policies. Highly urbanized areas in wealthy, coastal provinces have better funded welfare programs while areas in the center and west fall behind per-capita expenditure standards in education, health, pension, and employment programs. One under-studied driver of inequality is the variation in welfare spending within China’s cities. Because of the hierarchical nature of China’s bureaucracy, county governments—those below the city/prefecture level—have significant control over public budgets for education, healthcare, pension, and employment programs. This structure creates opportunities for variation in welfare provision within one city. Historically, districts in the inner core have significantly higher spending, with better funded services, than the county regions that surround it. But just how much difference this core-periphery division makes varies across the country. County governments within one city vary, too, creating a more diverse fiscal environment than existing studies depict.
How does welfare provision vary within China’s cities? In this paper, I employ timeseries data of county- and district-level government fiscal expenditures from 1994 through 2015 to evaluate the distribution of government welfare spending between the urban core and its surrounding rural counties in China’s 333 prefecture-level cities. Using multiple inequality indices, I compare how cities’ welfare distribution has evolved over time and compare with each other, building a typology of cities based on both their level of fiscal integration, inequality, and temporal trajectory. Beyond the basic description of how intracity fiscal inequality operates across the country over time, I explain this variation in terms of historical central government regional development plans.

Author

• Samantha Vortherms, University of California, Irvine