Compulsory Education for Children of Migrant Workers: The Division of Fiscal Responsibility Based on an Empirical Analysis of the Expenditures from the Central and Local Governments

China attaches great importance to the compulsory education for children of migrant workers. The key to promoting the fair, high-quality, and balanced development of compulsory education lies in the rational division of the fiscal responsibility between the central and local governments so that compulsory education for children of migrant workers is guaranteed by adequate and reliable funds and appropriate systems. Based on the theories of the “subsidy for the gap” and externality, this study makes an empirical analysis of the existing division of the fiscal responsibility for compulsory education for children of migrant workers between the central and local governments, the funding gap, and the methods to grant subsidies. The results show that more than 95% of the fiscal responsibility under the policy of “funds going with schoolchildren” falls on the local government of the city where children of migrant workers live and learn; and compared with the bonus under a certain policy, the subsidy and the orientation from the central government tend to be weakened; to some extent, this can be viewed as a “reverse subsidy.” It is necessary to define the boundary for expenditures between the central and local governments and reconstruct the rational proportion of their fiscal responsibility, shift more fiscal responsibility to the central government based on the financial capacity of the local government and the scope of external benefits from the compulsory education for children of migrant workers, and strengthen the overall planning by the provincial government and its fiscal responsibility to avoid the overburden of the county-level government. The decrease in the proportion of the local government's fiscal responsibility does not indicate an average allocation of the proportion of the fiscal responsibility between provincial, prefectural, and country-level governments; instead, it aims to reduce the fiscal responsibility of the country-level government, and reasonably increase the proportion of the fiscal responsibility from the provincial government through its overall planning, thus rationally reconstructing the fiscal responsibility of the central and local governments.