Institutional inertia, local leadership turnover, and changes in the structure of fiscal expenditure

Abstract

AbstractTaking the perspective of local party and government leadership change and using L-kurtosis to analyze provincial panel data in China from 1996 to 2018, this article identifies the structural change pattern of fiscal expenditures. We find that economic construction, science, education, culture, and health expenditures conform to the punctuated equilibrium pattern, while public security expenditures conform to the gradualism pattern. For expenditures under the punctuated equilibrium pattern, the longer the current local leader’s tenure is, the greater the friction with institutional inertia, and the larger the deviation from the average expenditure structure during the previous local leader’s tenure; however, for expenditures under the gradualism pattern, the local leader factor does not have a significant effect. This article also discusses the motivations of new local leaders for adjusting their expenditure structure. In terms of the proportion of economic development expenditures, in targeting expenditures, new leaders are more likely to “strive for the upper ends of the country,” while the expenditures for science, education, culture, and health are targeted to “converge to the national average.”