ABSTRACT This study empirically examines the inverted U‐shaped relationship between natural disaster experiences and the government reserve fund rate using panel data from 31 Chinese provinces between 2015 and 2021. It identifies the threshold at which provincial governments learn from their past experience. This pattern may originate from the institutional rigidity in China's emergency finance system and shifting intergovernmental fiscal responsibilities via moral hazard. Our analysis uncovers this complex relationship by examining the institutional determinants of provincial budgetary decisions, providing an empirical basis for optimizing emergency fiscal systems and designing evidence‐based fiscal policies.
Liu et al. (Fri,) studied this question.
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