The Impact of Fiscal Support for Agriculture on the Revitalization of Rural Industries - A Case from China

Abstract The low economic but high social benefits of rural industries necessitate increased fiscal investment for their development. This study looks at how fiscal support for agriculture affects the level of revitalization of rural industries. It does this by using panel data from 30 provinces from 2003 to 2021 and fixed effects, fixed effects instrumental variable models, and spatial econometric models. The study’s findings are outlined below: First, overall, fiscal support for agriculture has a positive effect on the revitalization of rural industries in China. Particularly since the Chinese government proposed the Rural Revitalization Strategy in 2017, this effect has strengthened. However, structurally, the impact is greater on the integration of agriculture > the quality of agriculture > the efficiency of agriculture > the technologization of agriculture. Second, the impact of fiscal support for agriculture varies across different regions. Fiscal investment in agriculture significantly promotes the revitalization of rural industries in major grain-producing areas, has no significant effect in major grain-selling areas, and has almost no effect in areas where production and sales are balanced. Third, fiscal support for agriculture exhibits spatial aggregation effects. However, this effect has diminished since 2012, when the Chinese government vigorously promoted industrial restructuring and accelerated the shift from labor-intensive to technology, capital, and knowledge-intensive industries. Fourth, local fiscal investment in agriculture has a stronger economic effect at the local level while reducing the agricultural production efficiency of surrounding areas. Therefore, it is necessary to adjust the structure of fiscal expenditures, adopt differentiated fiscal support policies, adjust expenditure structures, and innovate and optimize policy tools and funding methods for fiscal support of rural revitalization.