Comprehensive budget performance management reform, budget deviation, and local governance effectiveness: an empirical study

The Comprehensive Budget Performance Management Reform (CBPMR), a major initiative to modernize China’s governance system and capacity, has important implications for local governance effectiveness. Using panel data for 30 Chinese provinces from 2007 to 2023, this study treats the CBPMR as a quasi-natural experiment and uses budget deviation, fiscal transparency, and fiscal autonomy as measures of reform intensity to examine its association with local governance effectiveness. The results show that budget deviation, fiscal transparency, and fiscal autonomy are significantly and positively associated with local governance effectiveness, while greater budget deviation may also indicate a risk of symbolic compliance. Heterogeneity analysis indicates that the association is significant only in provinces with higher public service delivery and lower fiscal pressure and in eastern China. Further analysis indicates that the CBPMR is associated with higher levels of public service delivery and residents’ welfare but with a lower level of shared development.