Effects of the Supervision Down to the Countryside on Public Spending: Empirical Evidence from Rural China

Abstract

Improving the supply of rural public goods serves as a driving engine for rural revitalization and provides fundamental assurance for achieving self-sustained development in rural areas. This study examines how China’s supervision down to the countryside (SDC) policy affects village-level public expenditure, addressing broader debates on grassroots governance reforms. Using 2005–2019 panel data from 100 villages across five provinces, we employ a multi-period staggered difference-in-differences (DID) design to identify causal effects. Empirical results indicate that SDC implementation significantly reduced overall village public spending and investment in new public goods, primarily driven by enhanced budget constraints. Case analysis reveals that this occurs through procedural formalization and participatory oversight. Heterogeneity analysis shows that the effect is more pronounced in villages with weaker clan influence, lower economic development, and absence of factional competition. The findings of this study provide empirical evidence for the perspective in village power supervision theory that “top-down, external, institutional supervision requires clearly defined boundaries” and provides a reference for policies aimed at promoting the sustainable development of rural governance.