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Vulnerability, Public Service Delivery and Fiscal Decentralization: The experience of China as a Developing and a Transition Country

Abstract : The research of this thesis focuses on the nexus of vulnerability (or the risk to become poor), fiscal decentralization and public service delivery in the perspective of the development of China during the last 50 years. This development has been remarkable: a consistent high level of economic growth, a massive reduction of poverty and at the same time wide and fundamental reform of the public sector. The subject is a contemporary issue in particularly as vulnerability is considered a key for addressing the poverty challenges in the world and is strongly related to public services and decentralisation. The thesis presents a methodology to estimate the evolution of vulnerability by region through analysis of household assets consisting of liquid resources, human capital and health care. This is done on the basis of provincial level panel data in China from 1985 to 2001. Asset composition is estimated through an one-stage Theil decomposition index which is introduced into a logistic regression. The conclusion is threefold: Firstly, liquid assets and human capital contribute to the reduction of vulnerability, while health care does not reduce vulnerability. Secondly, Interior and Western regions have higher degree of vulnerability, while the Eastern region has lower vulnerability. Thirdly, inequalities within regions contribute about 20-30% to vulnerability, while inequality between regions contributes about 70-80% to vulnerability. The research provides also empirical evidence on the extend that public service delivery is a determinant of fiscal decentralization by using OLS regression, OLS regression with Fixed Effect, Two-Stage Least Square (TSLS) and TSLS with FE to analyze the effects of various education and health variables on fiscal decentralization. This is undertaken on the revenue and the expenditure side, as well as on the growth of extra-budget revenues and extra-budget expenditures. The conclusion is that the quality of secondary and higher education has overall a negative impact on the fiscal decentralization, probably due to lack of internationalization of spill-over effect caused by huge migration in China. Also part of the research is an analysis of the impact on vulnerability, as measured by the dependent variable food consumption, by the quality of public services delivery in the education and health sector. This is undertaken through an OLS, OLS with Fixed effect, Two Stage Least Square (TSLS) and TSLS with Fixed Effect regressions as well as robustness tests through lags of respective one and two years. The conclusion is fourfold: (i) the quality of primary education has a negative impact on vulnerability, probable due to high inequality and to the selection bias of children from poor families being taken out of school (Connelly and Zheng, 2003); (ii) the quality of the secondary education service has a negative impact on vulnerability in all time lags with TSLS with Fixed Effect. Therefore, these results are strongly robust; (iii) the quality of higher education service has a negative impact on vulnerability. However, these results are less robust than the one with secondary education; and (iv) the health care has also a partially positive impact under the fixed effect. The research in this thesis is based on datasets from five sources: (i) China Datacenter of Michigan University; (ii) China Statistical yearbook; (iii) Prof. Belton M. Fleisher and Prof. Min Qiang of Ohio University on human capital; (iv) Prof. Jing Jin of John Hopkins University and Prof. Heng-fu Zou of the World Bank on fiscal decentralization; and (v) Prof. Yiu Por Chen of DePaul University in Chicago on political decentralization. The policy implication of the thesis is that vulnerability can be reduced substantially through social service delivery. However, fiscal decentralization in China has led to the introduction of userfees which form a barrier for the poor, particularly in the rural areas. The fiscal decentralization policies therefore need be accompanied by a fiscal envelope for poor regions to ensure that basic services are available and accessible to all citizens
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Richard Schiere. Vulnerability, Public Service Delivery and Fiscal Decentralization: The experience of China as a Developing and a Transition Country. Humanities and Social Sciences. Université d'Auvergne - Clermont-Ferrand I, 2008. English. ⟨tel-00276130⟩

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