The Equalization Effect of China's Transfer Payments System

This paper analyzes the equalization effect of China's transfer payments system by applying the long and dense time-series Theil Indexes model. The conclusion is that: the transfer payments system substantively improves the local government's fiscal revenue equalization in China,but its equalization effect is not so obvious on the local government's fiscal expenditure. It can be said that the existing system of transfer payments ignores the role of restriction in the local government's fiscal expenditure needs,but tends to achieve a balanced role in the local government's fiscal revenues. In fact,the determination of China's transfer payments system should consider the dual standards of public goods expenditure needs and local government fiscal revenues.