Using the fiscal datasets from 1993 to 2003 in China, this paper studies
fiscal disparities and the equalization effects of fiscal transfers at the county
level. The results indicate that there are huge fiscal disparities across regions,
and this kind of inequality takes on a lasting upward trend. The persistence
of fiscal inequality is very high, and also trends upward. Moreover, transfers
from upper governments exaggerate fiscal disparities at the county level.
The earmarked subsidies and tax rebates are the most unequal fiscal transfer
schemes. The factor transfers have some equalization effects when we take per
capita fiscal ability calculated by fiscal-supported population into account, but
neutralization effects disappear from the viewpoint of per-capita fiscal ability
averaged by total population.