The Impact of County-Level Government Fiscal Expenditure on Rural Common Prosperity
Keywords:
government fiscal expenditure, rural common prosperity, income gap, fixed-effects model
Abstract
Common prosperity, as a core value pursuit of the socialist theoretical system with Chinese characteristics, profoundly reflects the essential attributes and distinctive features of Chinese modernization. Among these, effectively narrowing the urban-rural income gap is a critical pathway to achieving common prosperity. Scientific and rational fiscal expenditure policies, serving as an important tool for adjusting national income distribution and promoting social equity and justice, play an indispensable role in advancing common prosperity. Based on county-level panel data from China between 2000 and 2023, this study constructs a two-way fixed-effects econometric model to empirically analyze the impact of government fiscal expenditure on rural common prosperity. The findings indicate that government fiscal expenditure significantly enhances rural common prosperity, a conclusion supported by robustness tests including alternative econometric methods, lagged treatment, and winsorization. Heterogeneity analysis reveals that the fiscal expenditure elasticity in less-developed regions is significantly higher than in developed regions, and the fiscal expenditure coefficient in high-transfer regions is markedly greater than in low-transfer regions, aligning with the law of diminishing marginal utility and the Lewis dual-sector model. Mechanism analysis demonstrates that government fiscal expenditure boosts common prosperity by promoting capital deepening (i.e., stimulating fixed-asset investment) and by driving the primary and secondary industries, exhibiting partial mediating effects.
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[3] Ma, M., Liu, F., & Zhang, H. (2022). Research hotspots, evolutionary paths and main characteristics of common prosperity—A CiteSpace analysis based on the duplicated journal materials of Renmin University of China's Copy Center. Economic and Management Review, 38(4), 39–50.
[4] Liu, P., Qian, T., Huang, X., & et al. (2021). The connotation, realization path and measurement methods of common prosperity. Management World, 37(8), 117–129. https://doi.org/10.19744/j.cnki.11-1235/f.2021.0118
[5] Li, J. (2021). Common prosperity: Conceptual analysis, century-long exploration, and modernization goals. Reform, (10), 12–21.
[6] Huang, Z., & Zhang, S. (2022). The historical context of China's common prosperity development and the "raising the low" pathway. Journal of Jiangsu University (Social Science Edition), 24(4), 1–7.
[7] Xia, J., & Liu, C. (2021). Digital economy empowers common prosperity: Pathways and policy design. Research on Economics and Management, 42(9), 3–13. https://doi.org/10.13502/j.cnki.issn1000-7636.2021.09.001
[8] Wang, T., Wu, Y., Chen, C., & et al. (2022). Analysis of the impact mechanism and pathway for comprehensively promoting rural revitalization to achieve common prosperity. Northwest Population, 43(5), 102–112.
[9] Li, S. (2021). The goal of common prosperity and the choice of implementation paths. Economic Research Journal, 56(11), 4–13.
[10] Zhang, M., & Zhao, Z. (n.d.). The internal logic and realization path of new quality productive forces in promoting common prosperity for farmers and rural areas. Journal of China Agricultural University (Social Sciences Edition), 1–17.
[11] Yang, H., Wu, B., & Song, Z. (2025). A study on the effect of new agricultural productive forces on common prosperity. Jiangxi Social Sciences, 45(4), 55–68.
[12] Tang, R., Meng, N., & Ye, T. (2022). The evolution, practical value, and realization path of the idea of common prosperity. Reform, (1), 16–27.
[13] Zhang, W. (2022). Policy considerations on expanding the middle-income group and promoting common prosperity. Social Sciences Journal, (6), 86–93.
[14] Zhang, L., & Li, J. (2021). The connotation, strategic objectives, and policy measures for promoting common prosperity. Reform, (9), 16–33.
[15] Yang, Y., & Wang, M. (2021). A higher standard of common prosperity and its realization path. People's Forum, (23), 72–74.
[16] Kang, J. (2022). The relationship between the equalization of basic public services and common prosperity: Coupling, functional positioning, and mechanism of action. Journal of Shanghai Institute of Administrative Sciences, 23(2), 58–65.
[17] Li, S., & Yang, Y. (2022). Basic public services equalization for common prosperity: Action logic and path selection. China Industrial Economics, (2), 27–41. https://doi.org/10.19581/j.cnki.ciejournal.2022.02.002
[18] Jiang, Y., & Xie, Q. (2021). Solidly promoting common prosperity: Logical path and implementation path. Economic Horizons, (4), 15–24.
[19] Liu, C., & Zhao, S. (2025). The impact of digital rural construction on the common prosperity of farmers and rural areas: A study from the perspective of wealth creation and inclusive sharing. Finance Research, 51(3), 65–79.
[20] Wen, F. (2025). Digital rural construction promoting high-quality development of rural economy: Obstacles and practical paths. Shenzhen University Journal (Humanities and Social Sciences Edition), 42(1), 5–16.
[21] (n.a.). (2018). Research on the path of digital economy empowering urban and rural common prosperity under the new development pattern. Sociologia Ruralis, 48(2), 166–183. https://doi.org/10.1111/soru.12209
[22] Wang, X., & Xi, H. (2025). Digital economy, skill premium and labor wage income gap. Economic Review, (2), 21–37.
[23] An, Q., & Liu, J. (2024). The impact of residents' financial literacy on the income disparity between urban and rural areas in the digital era. Research on Financial Development, (8), 44–54.
[24] Luo, H., Liu, H., & Lei, Y. (2025). The impact of digital financial literacy on the economic resilience of rural households. Finance Theory and Practice, 46(1), 12–18.
[25] Zhang, Y. (2025). Empirical test of digitalization of circulation in rural revitalization: A perspective on common prosperity in urban and rural areas. Business Economics Research, (8), 105–109.
[26] Liu, M., Zhang, Y., Zhang, Q., & et al. (2024). The current situation, problems, and suggestions of fiscal support for rural development in China. Shanxi Agricultural Economy, (20), 203–205.
[27] Meng, J., & Zhu, B. (2023). From the state allocation theory to the public finance theory of socialism with Chinese characteristics—A political economy examination of the construction of an autonomous knowledge system of China's fiscal basic theory. Academic Monthly, 55(12), 25–40.
[28] Yan, K., & Bao, S. (2019). Thoughts and implementation paths of financial support for the rural revitalization strategy. Research on Financial Issues, (3), 90–97.
[29] Zhang, J., Ma, M., & Yang, D. (2025). Analysis of research hotspots and trends in domestic and international rural industrial structure from the perspective of rural revitalization. Anhui Agricultural Science, 53(2), 232–240.
[30] (n.a.). (2024). The path to common prosperity: Rising social construction and livelihood expenditure. BMJ Global Health, 43(2), 161–170.
[31] Mao, Z., Li, X., Qin, Z., & et al. (2023). Examining the impact of fiscal resources on anti-poverty expenditure: Evidence from China. Sustainability, 15(5), 4371. https://doi.org/10.3390/su15054371
[32] Song, Y., & Shang, Q. (2024). An empirical study on the impact of fiscal revenue and expenditure structure on common prosperity. Finance Science, (4), 101–115.
[33] Ma, H., & Deng, Z. (2025). Fiscal investment in rural education and human capital quality under the perspective of high-quality and balanced development—Natural experimental evidence based on the 'new mechanism' reform. Macro Quality Research, 13(2), 108–118.
[34] Sun, D. (2024). The long-term impact of county-level government education expenditure on individual education. Journal of Tianjin Academy of Educational Sciences, 36(2), 69–83.
[35] Hooley, B., Afriyie, D.-O., Fink, G., & et al. (2022). Health insurance coverage in low-income and middle-income countries: Progress made to date and related changes in private and public health expenditure. BMJ Global Health, 7(5), e8722. https://doi.org/10.1136/bmjgh-2022-008722
[36] Liu, D., & Wang, J. (2023). Analysis of the construction path of modern agricultural industrial parks in Guangdong Province with financial support. Guangdong Agricultural Science, 50(6), 153–162.
[37] Zhu, J., & Jin, L. (2017). Agricultural infrastructure, grain production costs and international competitiveness—An empirical test based on total factor productivity. Agricultural Technology and Economics, (10), 14–24.
[38] Chen, X., Tang, L., & Tang, Y. (2023). Does the rural e-commerce policy help narrow the urban-rural income gap?—A perspective based on factor mobility and expenditure structure. Agricultural Technology & Economics, (3), 89–103.
[39] Liu, X. (2022). The mechanism of Chinese fiscal decentralization and fiscal transfer payments on common prosperity (Doctoral dissertation). Shanxi University of Finance and Economics.
[40] Wu, J., & Zhang, H. (2024). The impact of livelihood-oriented fiscal expenditure on the income disparity between urban and rural residents under the goal of common prosperity—An analysis based on education and social security employment fiscal expenditure. Contemporary Finance, (1), 32–45.
[41] Zeng, S. (2025). Issues and realization paths of linking poverty alleviation with rural revitalization. China Collective Economy, (12), 21–24.
[42] Zhou, Y., Qiu, Z., Jiang, S., & et al. (2024). Digital economy development and rural common prosperity: A synergistic perspective of e-commerce and digital finance. Economic Research, 59(7), 54–71.
[43] Ye, W., & Zhang, X. (2024). Fiscal expenditure, fiscal pressure, and excessive credit expansion: Proactive or passive? Economic Issues, (12), 58–68+77. https://doi.org/10.16011/j.cnki.jjwt.2024.12.013
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2025-06-12
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