Decision Rights, Fiscal Flows, and County Fiscal Expenditure: A Systems Perspective on China’s Province-Managing- County Reform

Multilevel public finance is a social-administrative system in which authority, fiscal resources, information, and implementation responsibilities circulate across government tiers. China’s Province-Managing-County (PMC) reform provides a case for evaluating how governance redesign affects county-recorded fiscal expenditure. We define the system boundary as the province–prefecture–county fiscal governance chain and decompose the reform into administrative power delegation (D1), which changes decision rights, and fiscal direct reporting (D2), which changes fiscal-flow paths. Using a county-level panel of 2219 counties in 31 provinces from 2000 to 2019, we combine generalized synthetic control, Matrix Completion, panel unconditional quantile regression, and spatial diagnostics. The average effect is positive in the preferred gsynth specification and the Matrix Completion benchmark, but the magnitude is model-dependent: 16.7% under gsynth and 8.1% under Matrix Completion, with further sensitivity to latent-factor choices. Reform-type estimates and a common-model CATE equality test suggest stronger estimated effects for D1 than D2, interpreted as institutional heterogeneity rather than causal dominance. Distributional and spatial diagnostics indicate weaker lower-tail effects and geographically uneven absorption. The findings suggest that changing decision rights and fiscal-flow paths can reshape county fiscal system outputs.