Fiscal Transparency and Local Government Education Spending Efforts

Abstract

Increasing education investment in each region and achieving balanced regional coordination are essential elements to promote high-quality development of education in China in the new era. How to stimulate local governments' willingness to spend on education becomes the focus point to optimize the public expenditure structure and increase the share of education expenditure. Using panel data of 285 prefecture-level cities in China from 2013-2019, the article empirically examines the impact of fiscal transparency on local governments' education spending efforts. It finds that local governments' education spending efforts increase significantly when fiscal transparency increases. The finding passes a series of robustness tests and shows heterogeneity in regional education levels, urban-rural development gaps, and before and after the implementation of the new Budget Law. Against the realistic background that local education spending is gradually facing rigid constraints, a study based on willingness to spend can help improve the government's motivation to supply education-based public goods.