Fiscal Decentralization and Natural Disaster Relief in China

Abstract

This paper analyzes the impact of fiscal decentralization on the level of government relief for natural disasters using 30 provincial-level data from 1997 to 2017 in China. The results show that fiscal decentralization positively impacts local government expenditure on natural disaster relief. Although it is different from the existing conclusion that fiscal decentralization inhibits the supply of local non-economic public goods, this conclusion can be explained by the literature on disaster prevention and control; the incentive of decentralization to increase government revenue increases the opportunity cost of disaster prevention and control investment, which makes the pre-disaster funds insufficient, and the post-disaster financial expenditure of natural disaster relief increase accordingly.