Does Fiscal Transfer Improve the Equalization of Regional Public Health Service Evidence from a Spatial Panel-Data Analysis in China

Abstract

Public health service is regarded a key social resource contributing to the national health and sustainable development. Its development gap, however, exists among regions in China due to the unbalanced regional economy, and is also affected by financial distribution. With the effect of tax reform, central fiscal transfer has become a strategic approach to narrow the regional gap of public health service and improve the regional development. This paper aims to evaluate provincial public health service levels in China by applying entropy method and shows that obvious spatial imbalance of public health service level exists in Chinese provinces and such imbalance is also consistent with that of average fiscal transfer from the central government to the regional ones. The current research also looks at, by adopting spatial panel model, a model developed from economic convergence model, whether central fiscal transfer effectively helps to lower the level of public health service difference in regions and the outcome depicts that central fiscal transfer, particularly fiscal transfer for specific purposes, accelerates Chinese public health service development especially in eastern, middle and western regions. From the perspective of spatial effect, neighborhood imitation effect exists to allow completion among neighboring regional governments and therefore more investment to public health service. Compared with the pace of economic development, central fiscal transfer’s limited effect is still seen in less developed regions particularly some midland and western areas, due to the inadequate investment rooted in government’s structured expenditure plan. The implication of this research is that, apart from the attention to economic growth, the government should, with the effort of fiscal transfer, financially focus more on the area of public health service.