Does Fiscal Decentralization Affect Regional High-Quality Development by Changing Peoples’ Livelihood Expenditure Preferences: Provincial Evidence from China

Abstract

The reform of the fiscal and taxation system is important for building a sound livelihood protection system as well as resisting the impact of uncertain events and thus promoting the quality of regional development. We explore the strengths and limitations of China’s fiscal decentralization system from the perspective of peoples’ livelihood expenditures, and provide an empirical basis for institution building for countries to withstand the shocks of uncertain events and promote high-quality regional development, using each provincial-level region in China as the research object. We find that fiscal decentralization has an inverted U-shaped relationship with regional high-quality development, and the inverted U-shaped relationship of fiscal decentralization with regional quality development is significant in the innovation, greenness, and openness dimensions. It is further found that in the process of constructing regional high-quality development, fiscal decentralization will raise the preference for healthcare expenditures, improve the modern public health system, and indirectly promote regional high-quality development, while it will lower the preference for social security employment expenditure, neglect the basic resident social security employment problem, and slow down the process of high-quality development. This paper expands the research on the correlation between fiscal decentralization, livelihood expenditure preferences, and regional development quality, and provides an important theoretical and practical basis for the improvement of the fiscal system and the improvement of social welfare levels in the post-COVID-19 era.