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Fiscal Dependency and Policy Implementation:An Empirical Study on the Intra-Provincial Inequality of Financing Basic Education

The study is designed to explore the influence of the 1994 tax reform on the intra-provincial inequality of basic education.The empirical analysis finds that the reform decreases the inequality in general,implying that the central government could attain its policy goal through centralizing its relative fiscal capability and increasing the inter-governmental transfers.The data defy that there is a linear relationship between the fiscal dependency of province on the central government and the educational inequality,even though the reform has changed the fiscal dependency of each province significantly.But the study strongly supports that there is a U-shape relationship between the fiscal dependency and the inequality.This indicates that when the fiscal dependency increases, the education in a richer province will be more equalized while that in a poorer province will be more in inequality.