Fiscal Livelihood Spending’s Effects on Multidimensional Poverty Reduction in China

Li Xiaojia (李晓嘉)1, Jiang Cheng (蒋承)2* and Hu Lianyi (胡涟漪)3

1 School of Public Administration, University of International Business and Economics, Beijing, China

2 Graduate School of Education, Peking University, Beijing, China

3 Institute of Finance & Economics, Shanghai University of Finance and Economics, Shanghai, China

Abstract:This paper investigates how fiscal spending on livelihood improves multidimensional household poverty in China. Based on the panel data of the “China Health and Nutrition Survey” (CHNS) for 2004-2015, we measured the chronic multidimensional poverty index for Chinese households. We have created a multitiered model for empirical analysis. Our findings suggest that multidimensional poverty in China is predominantly capacity poverty. Fiscal spending on livelihoods significantly reduces multidimensional poverty for Chinese households, especially rural households. Investments on livelihoods are more poverty-reducing than transfer spending on livelihoods. As an innovation, this paper offers a dynamic analysis of the effects of livelihood spending on multidimensional household poverty controlling for heterogeneity between individual households and across regions. Our conclusion suggests that the government should improve policy arrangements to increase social opportunities and support sustainable development capacities for the poor, while enhancing protective social security systems.

Keywords: fiscal spending on livelihoods, chronic multidimensional poverty, multitiered model, poverty-reducing effects

JEL Classification Codes: H51, H52, H55, I32

DOI: 10.19602/j.chinaeconomist.2021.03.08