Impact of fiscal poverty alleviation funds on poverty mitigation and economic expansion: evidence from provincial panel data in China

Purpose Since 2013, China has implemented targeted poverty alleviation policies, successfully eradicating absolute poverty nationwide by 2021. The fiscal funds allocated for poverty alleviation have significantly contributed to reducing poverty in impoverished areas. However, to date, there has been a lack of scholarly research specifically examining the effects of these fiscal poverty alleviation funds on both poverty reduction and economic growth. This study aims to address two key questions: What role do fiscal poverty alleviation funds play in reducing poverty? Additionally, do these funds contribute to economic growth? Design/methodology/approach Provincial panel data in China from 2010 to 2020 are used to test the impact of fiscal poverty alleviation funds on poverty reduction and economic growth. The empirical study of this paper primarily employs panel data within difference and two-stage least squares (2SLS) estimation for causal identification. Findings Poverty alleviation funds positively influence China’s economic growth and significantly reduce the rural poverty rate. During the sample period, the contribution of poverty alleviation funds to economic growth reached 7.3%, and the contribution to the reduction of the poverty incidence rate was 8.4%. Originality/value The key contribution of this study lies in its novel approach of using empirical methods to probe the impacts of fiscal poverty alleviation funds on provincial economic growth. Additionally, this paper also empirically tests the mechanisms by which fiscal poverty alleviation funds promote growth and reduce poverty, mainly by improving the infrastructure development conditions in impoverished areas.