Deepening the fiscal and taxation system reform and releasing the system dividend is the key to boosting local economic growth and the improvement of peoples livelihood. This paper first systematically interprets the mechanism of the vertical imbalance of finance on economic growth, and then constructs the dynamic panel simultaneous equation model to integrate the vertical fiscal imbalance, public expenditure structure and economic growth into the analytical framework, and empirically explores the impact of vertical financial imbalance on local economic growth, and then through further standardized regression estimates to examine the role of fiscal vertical imbalances in economic growth channels and transmission effects. The study finds that fiscal vertical imbalance not only significantly reduces economic growth through direct channels of action, but also indirectly exerts a negative inhibitory effect on economic growth through the role of local government public expenditure structure.

financial vertical imbalance , public expenditure structure , economic growth , dynamic simultaneous equation model