







































 

 

 

 

 

Can Transfer Payment Reduce the Inequality 

of Compulsory Education in Poor Areas? An 

Empirical Study Based on the Data from 18 

Counties in 6 Provinces in China

Weidong Fu,
1
 Wei Zhou

2
 

 
1. Faculty of Artificial Intelligence Education, Central China Normal 

University, Wuhan 430079, Hubei, China 

2. College of Education, Central China Normal University, Wuhan 

430079, Hubei, China

Abstract. Transfer payment is of great significance for poverty 

alleviation and balanced regional development. Based on the first-hand 

survey data from 18 key counties of 6 provinces in China’s national 
poverty alleviation and development program, this paper uses propensity 

score matching to calculate the effects of transfer payment funds on the 

results of compulsory education in impoverished areas and uses Shapley 
value decomposition to decompose correlated factors. It finds that when 

the characteristics of students, families and schools controlled, transfer 
payment funds significantly lower student academic achievements in 

some subjects and aggravate the inequality of educational results, which 

may be the result of the reduction of local education funds caused by the 
“crowding out effect” of transfer payment. Suggestions are made in this 

paper to standardize the utilization of transfer payment funds, establish 
a linkage mechanism between the educational results of poor students 

and transfer payment funds, implement the assisting plan for teachers 

and students in poor areas, strengthen the “pertinent support for 
intelligence development”, and unite multiple agencies to increase input 

in education, with the purpose of reducing the inequality of compulsory 

education in poor areas. 

Best Evidence in Chinese Education 2022; 10(2):1405-1413. 

Doi: 10.15354/bece.22.ar030. 

How to Cite: Fu, W., & Zhou, W. (2022). Can transfer payment reduce the inequality 

of compulsory education in poor areas? An empirical study based on the data from 

18 counties in 6 provinces in China. Best Evidence in Chinese Education, 



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No.2, 2022 1406 

10(2):1405-1413. 

Keywords: Transfer Payment, Poor Areas, Compulsory Education, Educational 

Results, Propensity Score Matching (PSM), Shapley Value Decomposition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

About Authors: Wei Zhou, College of Education, Central China Normal University, Wuhan 430079, Hubei, China. 
E-mail: zhouwei19980726@163.com  

Correspondence to: Weidong Fu, Faculty of Artificial Intelligence Education, Central China Normal University, 

Wuhan 430079, Hubei, China. E-mail: 604143009@qq.com  

Conflict of Interests: None. 
 

© 2022 Insights Publisher. All rights reserved. 

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the 

Creative Commons Attribution-NonCommercial 4.0 License 

(http://www.creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of 

the work without further permission provided the original work is attributed by the Insights Publisher. 

mailto:zhouwei19980726@163.com
mailto:604143009@qq.com


Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1407 

MARTYA Sen (as cited in Xiao & Li, 2021) once gave his insights into the 

relation between poverty and education that measuring poverty by economic 

standards is only the minimum threshold while the deprivation of the possibil-

ity of individual development constitutes the essence of poverty. Alleviating poverty 

through education is critical to addressing the issue of poverty in knowledge, skills, 

mental strength, culture, and information in one’s disadvantaged times (Fu, 2021) and 

fundamental to interception of intergenerational transmission of poverty (Li et al., 2020). 

Registration of impoverished households is a key component in China’s targeted pov-

erty alleviation program, basically funded by transfer payment (Chen et al., 2020). To 

evaluate the effects of transfer payment on student academic achievements in poor areas 

in China and define its mechanisms is of great significance to sustaining targeted pov-

erty alleviation, improving the efficiency of poverty alleviation through education, re-

ducing relative poverty, and promoting educational equity. 

Literature Review 

Transfer payment is a redistribution of incomes by the central government to narrow the 

gaps among regions of different development levels. It includes general transfer pay-

ment and special transfer payment. In previous studies of education-related transfer 

payment, most researchers focus their investigation on whether it has increased input in 

education and draw differential conclusions. A common belief is that transfer payment 

should be able to increase educational expenditure as its primary purpose is to provide 

public goods and rectify externalities across regions. Also, the central government has 

attempted to secure the educational input standards by legislation. The increase in trans-

fer payment by the central government should stimulate local governments’ willingness 

to implement the former’s policies and to enhance their investment in education (Ma & 

Hou, 2005). Some of the studies confirm the above opinion by presenting the fact that 

China’s general transfer payment has played the role of “helping hand” by making up 

for the fiscal deficits at local levels and significantly boosting local educational supply 

(Gong & Li, 2016), for every 100 million yuan increase in general transfer payment, the 

provincial financial input in education will rise by 18.4 million yuan (Xiao & Hou, 

2018). Other studies find that the existing promotion mechanism for local government 

officials tend to result in their neglect of investment in education and that transfer pay-

ment has little influence on local compulsory education due to the problems inherent in 

China’s transfer payment system (Yang, 2016). 

In addition, some investigations of the relationship between financial expendi-

ture and equalized development of educational results indicate that general financial 

expenditure in education has an “inverted U-shaped” impact on educational results. The 

increase in financial expenditure in education significantly reduces the negative effects 

of family economic status on student educational results, and thereby, relieves educa-

tional inequity to some extent (Chen & Zhi, 2017). Public educational input accounts 

for 12.6% of the difference in school educational results. Transfer payment, especially 

the special transfer payment, can promote the intergenerational mobility of human capi-

tal and expanding transfer payment can stimulate equalized development of human cap-

ital (Fang, 2020). However, empirical research on the relationship between financial 

expenditure and educational results is insufficient and some problems remain to be ad-

A 



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1408 

dressed: i) Few studies have investigated the direct association between transfer pay-

ment and student educational outcomes. Most of the previous studies ignore the control 

of selective biases and the difference in sample characteristics between experimental 

group and control group, thus unable to reach relatively accurate and unbiased evalua-

tion and research results; ii) Most researchers use the general sampling data from all 

over the country and pay little attention to the special situations of poor areas in China. 

Given that China is committed to eliminating “relative poverty” in the future, the pre-

sent study is to focus its exploration on whether transfer payment aids in alleviating 

inequality in educational results in undeveloped areas and how to improve the human 

capital quality of children in impoverished households, with the purpose of providing 

empirical evidence to educational development in poor areas. 

Research Design 

Sources of Data 

To investigate the academic performance and living conditions of compulsory educa-

tion students in impoverished areas in China, a project team was established in 2018 to 

conduct a field survey by random sampling on more than 180 primary and secondary 

schools in 18 key counties listed in the national poverty alleviation and development 

program in Hubei, Jiangxi, Guizhou, Sichuan, Yunnan, and Shan’xi Province. A total of 

7894 questionnaires were distributed and 7439 valid ones drawn after screening, with 

an effective rate of 94.23%. 

Definition of Variables 

This paper defines students with registration cards (to register households which are 

entitled to transfer payment) as the transfer-payment-entitled group, that is, the treat-

ment group, and students without registration cards as transfer-payment-unentitled 

group, that is, the control group. To control individual characteristics, factors including 

student gender, being left-behind or not (when parents leave hometowns for job oppor-

tunities as migrant workers), boarding or not, grades, and urban or rural registered resi-

dence are incorporated as variables. Factors like parental education levels, vocations, 

and family economic status are integrated to be home economic, social, and cultural 

status (hereafter referred to as home ESCS). Home ESCS, together with family struc-

tures and family information capital (family’s possession of IT devices and access to 

Internet), is treated as variables related to student family backgrounds. As the survey is 

conducted in public schools, the present study need only to control two properties re-

garding school type: rural or urban school. To measure student academic achievements, 

the survey collects students’ scores of the last terminal exams in Chinese, Mathematics, 

and English. As test scores from different provinces cannot be compared directly, this 

study manages to standardize the exam papers for each grade in every school and the 

resulting scores of the three subjects are treated as dependent variables (Chen, Zhang, 

Chen, & Shi, 2018).  

Methodology 



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1409 

Propensity Score Matching 

Since the distribution of transfer payment funds is not completely random, there are 

remarkable differences in individual and family characteristics between the transfer- 

payment-entitled group and the transfer-payment-unentitled group. A simplified calcu-

lation of the effects of transfer payment funds on student educational results is bound to 

produce biases, and thus, it is necessary to control the selective biases. This paper uses 

propensity score matching to control individual, family, and school characteristics and 

then, calculate the effects of transfer payment on compulsory education. To ensure the 

validity of the results of the model, the study employs different matching methods to 

verify the results. After computing the propensity value, the nearest neighbor matching 

is adopted to draw the conclusion, followed by robustness tests by radius matching, 

kernel matching, and Mahalanobis distance matching.  

Shapley Value Decomposition 

At the second phase of data analysis, Shapley value decomposition is used to decom-

pose the factors affecting the academic achievements of compulsory education students 

in poor areas, calculate the contribution of transfer payment to the student academic 

achievements in different subjects, and put forward specific suggestions for them. In 

addition, the quadratic terms of family socio-economic status and the interaction terms 

between transfer payment and home ESCS are included in the model. 

Empirical Results 

Descriptive Statistics 

Descriptive statistics on the full sample, transfer-payment-entitled sample, and transfer-

payment-unentitled sample show that there are differences in student characteristics, 

family characteristics, and student academic achievements between the treatment group 

and the control group. However, they do not tell whether the differences are of statisti-

cal significance. To confirm whether the impact of student overall backgrounds on their 

access to transfer payment is statistically significant, this study conducts a regression 

analysis using “access to transfer payment” as dependent variables and student, family, 

and school characteristics as independent variables. The results indicates that apart from 

gender, being left behind or not, and school properties, the other variables have signifi-

cant impact on whether students receive transfer payment or not. Urban students’ prob-

ability of access to transfer payment is 74.7% lower than that of rural students; Board-

ing students’ probability of access to transfer payment is 73.3% higher than non-

boarding students; With the promotion of grade, students’ probability of access to trans-

fer payment decreases slightly; The higher the rating of family ESCS, the lower the stu-

dent’s probability of access to transfer payment; The probability of access to transfer 

payment of students from the normal family structure is significantly lower than that of 

students from special family structures; Students’ probability of access to transfer pay-

ment is negatively correlated with the quantity of family information capital; The effect 

of the gender variable is not significant, indicating that there is no significant relation-



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1410 

ship between the gender of children and the family economic status; The absence of 

parents as migrant workers has a negative effect on their left-behind children during 

their first year away from home, which is later replaced by a positive effect since in-

comes from their jobs in distant localities can improve the overall economic condition 

of the family, (Gao et al., 2018). Therefore, the access to transfer payment is correlated 

with individual and family characteristics, and it is necessary to control variables related 

to student background information. 

Propensity Score Estimates 

To effectively reduce the impact of individual, family, and school characteristics on 

student educational results, this study uses the nearest neighbor matching to match the 

calculated propensity values and then conducts balance tests on the matching results. 

The results of t-tests denote that before matching, there exist significant differences be-

tween variables (except gender) of treatment group and control group while after 

matching, sample biases of most variables (except grades and being left behind or not) 

are reduced by over 90% and the absolute values of standard deviations are all below 20.  

After matching the sample of the treatment group with that of the control group, 

the study finds that the calculated results have changed to various degrees and that the 

overall effect of transfer payment on student educational results decreases, indicating 

that without the control of the background information of the sample, the results could 

be overestimated. Before matching, there is a significant negative correlation between 

transfer payment and student academic achievements. When individual, family, and 

school characteristics controlled, “counterfactual estimation” can be conducted, which 

assumes that differences in student academic achievements result exclusively from the 

accessibility of transfer payment. The calculation of the average treatment effect (ATE) 

of the treatment group reveals that after matching, the significance of the impact of 

transfer payment on student educational results is reduced. Transfer payment signifi-

cantly lowers mathematics results of students in poor areas by 4.2% while its influences 

on student Chinese and English results are insignificant. 

Robustness Tests 

To verify the reliability of the matching results, after analyzing data by the nearest 

neighbor matching, the study carries out radius matching, Kernel matching, and 

Mahalanobis distance matching and confirms the results of the nearest neighbor match-

ing. The pre-matching results indicate that transfer payment significantly lowers stu-

dents’ Chinese and Mathematics results yet has no significant impact on English results; 

The post-matching results show that transfer payment has a significant negative impact 

on students’ mathematics results yet has no significant impact on Chinese and English 

results.  

Shapley Value Decomposition 

To make more detailed analysis of the effects of transfer payment on the student educa-

tional results in poor areas in China, Shapley value decomposition is applied to decom-

pose the factors influencing students’ Chinese, Mathematics, and English performance 



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1411 

based on the results from propensity value matching. The results of SVD indicate that 

when individual and family characteristics controlled, the access to transfer payment 

poses significant negative effects on students’ mathematics test scores, confirming the 

results of propensity score estimates. According to SVD results, transfer payment ac-

counts for 11.34% of the disparity in Mathematics results among students and has no 

impact on Chinese and English results, which denotes that transfer payment does not 

aid in alleviating the inequity of educational results in poor areas but rather aggravate 

the inequality. In addition, there is gender difference in student academic achievements 

in that boys’ English and Chinese results are much lower than those of girls, while their 

mathematics results significantly higher than those of girls; Urban and boarding stu-

dents’ Chinese results are remarkably lower than those of rural and non-boarding stu-

dents; Home ESCS yields the most significant effect on student academic achievements, 

accounting for 54.07%, 49.24%, and 47.34% differences in student Chinese, Mathemat-

ics, and English results respectively; Students’ family structures significantly impact 

their mathematics and English results in that academic performance of students from 

normal families are superior to that of students from single-parent families; The school 

properties make significant differences to students’ English and Chinese results as ur-

ban students typically perform better in English and Chinese than their rural counter-

parts; The coefficient of interaction terms between home ESCS and entitlement to trans-

fer payment is significantly negative, indicating that among students of same home so-

cio-economic level, transfer payment poses negative impacts on their academic 

achievements. 

Conclusions 

The present study, based on the survey data from 18 counties in 6 provinces in China, 

concludes different results from some of the previous studies. It finds that compared to 

students who are not entitled to transfer payment, those entitled to it perform worse in 

Mathematics and that transfer payment has no significant effects on student English and 

Chinese results. According to the educational production function, the decrease of edu-

cational output is caused by the reduction of educational input. The reasons for the re-

sults of this study are summarized as follows: 

 

The increase in transfer payment funds does not necessarily result in the rise of 

educational input at local levels. 

 

Numerous studies of the relationship between transfer payment and local educational 

input have revealed the existence of “crowding effect” in educational funding, which 

means that the increase in transfer payment does not necessarily encourage the local 

government’s investment in education, but rather curtail local educational funds and 

weaken the local government’s commitment in boosting educational supply (Fu & Cui, 

2010). The follow-up empirical studies further confirm that transfer payment has a sig-

nificant negative impact on educational input. Typically, 1% increase in transfer pay-

ment leads to 0.03% decreases in investment in education (Yang, 2016). The present 

study reinforces the point of view of the previous studies by clarifying the negative ef-

fects of transfer payment on student academic performance. 



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1412 

The most problematic counties included in the national poverty alleviation and 

development program have had long-standing financial difficulties. 

 

When the central government allocates them part of the transfer payment funds for pov-

erty alleviation purpose, it is hard for those counties to prioritize education in decision-

making of funding. They are inclined to use the funds on more pressing issues and take 

the economic development and infrastructure construction as top priorities. The contin-

ual increase in transfer payment results in shrinkage of educational funding. 

 

Most transfer payment funds allocated to registered households are typically des-

ignated as funds for poverty alleviation through start-up business or employment. 

 

Such funds are often “earmarked” to encourage poor households to engage in reproduc-

tion. Meanwhile, funds for poverty alleviation through education are usually distributed 

by means of school operations, such as exemption from tuition and miscellaneous fees 

at compulsory education level, yearly subsidies of cash, and free lunch, etc. These 

measures may lead to parental neglect of family input in education. Parents would be-

lieve that the state should take charge of their children’s education and it is no longer 

their responsibility to make investment in child education. As a result, the input in child 

education is reduced, and the inequality of educational results is further aggravated. 

 

Differences in the effects of transfer payment on distinct subjects may be caused 

by their inherent features.  

 

For instance, transfer payment impacts student mathematics results most significantly 

because short-term efforts can make a difference to mathematics learning. The insignif-

icant impact of transfer payment on student English and Chinese performance is at-

tributed to the fact that the overall English level of students in poor areas is relatively 

low and that the learning of Chinese subjects requires long-term accumulation. 

 

 

 

 

 

 

 

References
Chen, C.J., & Zhi, T.J. (2017). Can the financial 

input in education effectively reduce the in-

equality of educational results? A study 

Based on the data of China Education Panel 

Survey. Educational research, 38(7):68-78. 

Chen, J., Zhu, H. G., & Weng, C. (2020). Tar-

geted poverty alleviation policy and rural 

relative poverty: A study of poverty-stricken 

villages and filing cards. Journal of Jiangsu 

University (Social Science Edition), 

22(5):39-51. 

Chen, X., Zhang, D.J., Cheng, G., Hu, T.Q., & 

Liu, G.Z. (2018). The Effects of Teacher 

Support and Psychological Suzhi on Middle 

School Students' Academic Achievement. 

Psychological Development and Education, 

34(6):707-714.DOI: 



Fu & Zhou. Transfer Payment and Inequality of Compulsory Education in Poor Areas. 

BECE, Vol.10, No. 2, 2022 1413 

https://doi.org/10.16187/j.cnki.issn1001-

4918.2018.06.09  

Fan, Z. Y. (2020). Fiscal transfer payment and 

intergenerational mobility of human capital. 

Chinese Social Sciences, 2020(9):48-67, 205. 

Fu, W.D. (2021). Relative poverty of students 

and strategies of poverty alleviation through 

education in the new era-Based on the sur-

vey of 18 key counties in the national pov-

erty alleviation and development program in 

6 provinces in central and western China. 

Journal of Hebei Normal University, 

23(2):64-71. 

Fu, W.D., & Cui, M.C. (2010). Research on the 

“crowding out effect” of rural compulsory 

education funds after the implementation of 

the “new mechanism”. Modern Education 

Management, 2010(10):24-27. 

Gao, Y.J., Bai, Y., Ma, Y., & Shi, Y.J. (2018). 

Positive and negative effects: A study on the 

impact of absence of parenthood on the aca-

demic performance of left-behind children. 

Studies in Labor Economics, 6(3):97-113. 

Gong, F. & Li, Z. (2016). “Helping hand” or 

“incentive trap” -- Evaluation of the effec-

tiveness of China’s balanced transfer pay-

ment. Economic Review, 2016(5):3-23. DOI: 

https://doi.org/10.19361/j.er.2016.05.01  

Li, T., Wu, Z.H., Zhou, H.X., & Ran, S.L. 

(2020). The strategy of poverty alleviation 

through education after China's comprehen-

sive construction of a well-off society under 

the 14th Five Year Plan. Research in Educa-

tional Development, 40(23):30-42. 

Li, X.Y., & Zhang, J.S. (2018). The impact of 

public education input on school educational 

results - An empirical study based on the da-

ta of 70 primary schools in Hubei Province. 

Journal of Zhongnan University of Econom-

ics and Law, 2018(6):81-88, 160. 

Luo, Q., & Yu, F.F. (2021). The influence of 

student academic burden on academic 

achievement - Based on the results of survey 

on academic quality of compulsory educa-

tion in S City. Education Measurement and 

Evaluation, 2021(7):30-37. DOI: 

https://doi.org/10.16518/j.cnki.emae.2021.07

.004  

Ma, J., & Hou, Y.L. (2005). Policymaking and 

budgeting processes in China’s Provincial 

Budget: Investigation in two provinces. 

Comparison of Economic and Social Sys-

tems, 2005(5):64-72. 

Xiao, J.H., & Li, Y.L. (2021). The effect of fi-

nancial transfer payment on poverty allevia-

tion of rural families in China. Journal of 

Zhongnan University of Economics and Law, 

2021(1):58-66. 

Xiao, P., & Hou, S.J. (2018). The effect of spe-

cial transfer payment on local educational 

supply-An empirical study based on 31 pro-

vincial panel data. Jianghuai Forum, 

291(5):181-186, 193. 

Yang, L.S. (2016). Does transfer payment in-

crease local educational expenditure? A 

study based on data of city levels from 2001 

to 2009. Educational Research of Tsinghua 

University, 37(3):74-84, 117. 

 

 

 

 

 

The Chinese version of this article has been published in Education & Economy, 2021, 37(6):53-

61. The English version has been authorized for being publication in BECE by the author(s) and 

the Chinese journal. 

付卫东，周威. (2021). 转移支付能否缩小贫困地区义务教育结果的不平等？ 基于 6 省 18 县

的实证分析. 教育与经济, 37(6):53-61. 

 

 

Received: 03 February 2022 

Revised: 22 February 2022 

Accepted: 06 March 2022 

 

https://doi.org/10.16187/j.cnki.issn1001-4918.2018.06.09
https://doi.org/10.16187/j.cnki.issn1001-4918.2018.06.09
https://doi.org/10.19361/j.er.2016.05.01
https://doi.org/10.16518/j.cnki.emae.2021.07.004
https://doi.org/10.16518/j.cnki.emae.2021.07.004

	Article-WeidongFu-BECE_Title_Mar2022
	Article-WeidongFu--BECE_MaintextMar2022

