Fiscal Decentralization, Chinese Style: Good for Health Outcomes?

— This study analyzes the effect of fiscal decentralization on health outcomes in China using a panel data set with nationwide county-level fiscal data. We find that more fiscally decentralized provinces have lower infant mortality rates than provinces that are the main spending authority, if certain conditions are met. Key among those conditions are the county governments’ own fiscal capacity and intergovernmental transfers. Local spending responsibilities need to be matched with county governments’ own fiscal capacity. When the county’s government relative spending responsibility is held constant, the ability to spend on local public goods and health outcomes depend upon intergovernmental transfers. 2009 Elsevier Ltd. All rights reserved.