Non-tax revenue and education expenditure: Evidence from provincial panel data in China

Using panel data for 31 provincial-level regions in mainland China from 2014 to 2023, this study examines the relationship between an increase in non-tax revenue and local education expenditure. The results show that an increase in non-tax revenue is significantly associated with higher local education expenditure. This finding remains broadly robust to System GMM estimation, policy-exposure instrumental variable estimation, and a series of robustness tests. Component-level analysis reveals that Special-Purpose Revenue, Administrative and Institutional Charges, and Revenue from the Compensated Use of State-Owned Resources and Assets are significantly and positively associated with local education expenditure, whereas Fines and Confiscation Revenue and Other Revenue exhibit no statistically significant associations. The estimated coefficients also differ across revenue components. Exploratory panel threshold analysis further identifies significant single-threshold effects when Administrative and Institutional Charges, Fines and Confiscation Revenue, and Other Revenue are used as threshold variables. However, the changes in the coefficients across regimes are modest and do not alter the underlying positive relationship. By incorporating fiscal revenue sources and their internal composition into the analysis of local education expenditure, this study extends the relevant literature, provides new provincial-level evidence on the relationship between different fiscal revenue sources and local education expenditure, and offers policy implications for differentiated non-tax revenue management and local education financing.