Fiscal hierarchy and poverty alleviation: micro-level evidence from a spatial discontinuity design

Based on the Province-Managing-County (PMC) reform and unique village-level Targeted Poverty Alleviation (TPA) data of Guangdong Province, China, this paper employs a spatial discontinuity design to examine the impact of fiscal hierarchy on poverty alleviation performance. The study finds that the PMC reform enhanced fiscal autonomy at the county level, creating fiscal incentives for local governments to adopt development-oriented approaches. These fiscal incentives induce county governments to invest fiscal resources in implementing development-oriented targeted poverty alleviation policies, as well as promoting rural infrastructure construction and agricultural production, ultimately improving poverty alleviation performance. This study reveals that fiscal hierarchy changes can shape visible-hand governmental interventions, thereby strengthening efforts to combat poverty in underdeveloped areas.