Impact of income inequality and fiscal decentralization on public health: Evidence from China

• Published in: Economic modelling 2021-01, Vol.94, p.934-944
• Main Authors: Hao, Yu, Liu, Jiahui, Lu, Zhi-Nan, Shi, Ruijie, Wu, Haitao
• Format: Article
• Language: English
• Subjects: China; Fiscal decentralization; Income inequality; Public health; Simultaneous equation model
• ISSN: 0264-9993; 1873-6122
• DOI: 10.1016/j.econmod.2020.02.034

In this study, the interrelationship between income inequality, fiscal decentralization, and public health is investigated within a comprehensive research framework for the first time. Using the panel data of 23 Chinese provinces for a period between 2002 and 2012, a carefully designed simultaneous equation model is used to control for potential endogeneity. The estimation results indicate that higher income inequality has a significant negative impact on public health performance. Interestingly, fiscal decentralization has negative direct and indirect effects on public health. Therefore, the empirical results suggest that China’s provincial governments, which have gained significant fiscal power through increased fiscal decentralization, should take the problem of income inequality more seriously, because fiscal decentralization and income equality may both have the potential to benefit public health. •The impact of income inequality and fiscal decentralization on public health in China is investigated.•A panel data set of Chinese provinces for the period 2002–2012 is utilized for empirical estimations.•A carefully designed simultaneous equation model is employed to deal with potential endogeneity.•Income inequality is estimated to be negatively related with public health.•Fiscal decentralization has both negative direct and indirect effects on public health.