Expenditure Decentralization and Citizen Satisfaction with Healthcare: Evidence from Urban China

There has been considerable debate whether fiscal decentralization improves the provision of public goods. Based on individual-level data from a nationally representative survey and county-level data from national compendiums of financial statistics and demographic statistics, this study analyzes the effect of expenditure decentralization on citizen satisfaction with public healthcare in urban China. The results indicate a significantly positive effect of expenditure decentralization on citizen satisfaction with public healthcare. We also find evidence that the impact of decentralization is associated with residency status. Further investigation highlights the importance of local economic development in realizing the potential gains from a decentralized system. This study suggests that decision-making at lower levels of government is more responsive to local needs and that the efficiency gains of decentralization are not necessarily accompanied by equitable distribution of welfare.