Assessing the expenditure decentralization in enhancing public service quality: Evidence from 29 province in China

Abstract

Insufficient and low public service quality in China has resulted in unfulfilled resident needs, necessitating an examination to improve public service quality. Thus, this study constructs a public service quality index for 29 provinces covering 2004–2020 to explore the relationship between expenditure decentralization and public service quality. Using Fixed effects model, OLS and System Generalized Method of Moments (SYS-GMM) technique, this study reveals that expenditure decentralization has a significantly positive effect on public service quality, with a 1 % increase in expenditure decentralization leading to a 0.287 % improvement in public service quality. Additionally, the impact of expenditure decentralization on public service quality in the eastern and central regions is positively significant, while in the western region, expenditure decentralization does not positively affect public service quality. Furthermore, based on the public service quality theory, this study finds that FDI and fiscal self-sufficiency can enhance the relationship between expenditure decentralization and public service quality. The study provides evidence-based recommendations for policymakers to prioritize expenditure decentralization as a strategy to enhance public service quality, especially when considering attracting FDI and promoting fiscal self-sufficiency.