Natural Disasters and Local Governments' Fiscal Misconduct

Evidence From Five Earthquakes in China

Bibliographic Data

ID7350612
AuthorsFan Lu (0000-0001-7852-3432, School of Public Finance and Taxation Central University of Finance and Economics Beijing China), Futao Lu (0000-0002-6057-1361, Central University of Finance and Economics), Qiang Ren (0000-0003-1269-8066, School of Public Finance and Taxation Central University of Finance and Economics Beijing China), Jingran Sun (0000-0002-5803-5025, School of Public Finance and Taxation Central University of Finance and Economics Beijing China), Hongmei Wang (0000-0002-7565-9040, Central University of Finance and Economics Beijing China)
Year2025
Publication date2025-09-23
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenuePolicy Studies Journal (JOURNAL)
Journal identifiersISSN: 0190-292X • E-ISSN: 1541-0072
PublisherWiley (PUBLISHER • GB)
DOI10.1111/psj.70081
OpenAlexW4414425121
LanguageEN
References cited52

Preventing fiscal misconduct associated with disaster‐aid related windfall revenue poses significant challenges for governments due to the unpredictable and often temporary nature of such income streams. This study examines how natural disasters affect fiscal misconduct among local governments by using five major earthquakes in recent China. Utilizing county‐level data compiled from five destructive earthquakes from 2012 to 2018 and a Difference in Differences (DID) design, our findings demonstrate a significant surge in fiscal misconduct, namely unpaid fiscal funds and miscalculated funds, following the earthquakes. We explore two underlying mechanisms, which are an increased amount of post‐disaster transfer payments and auditing intensity. Finally, our heterogeneity analysis highlights that how audit independence may detect more local governments' fiscal misconduct. This research aims to explain why local governments act opportunistically after natural disasters and offer practical implications for those who seek to increase the efficiency of local governance and oversight mechanisms for local governments

Agricultural risk and resilience · Financial Literacy, Pension, Retirement Analysis · Fiscal Policies and Political Economy