Abstract: To construct a central-local fiscal and administrative power relationship with clear powers and responsibilities as well as coordinated financial resources, and to improve the transfer payment system are the inevitable requirements for alleviating the contradiction of vertical fiscal imbalance and improving the level of livelihood-orientated public service provision in the new era. To this end, based on the typical facts of Chinese fiscal decentralization, this paper conducts an empirical test of the impact of vertical fiscal imbalance and transfer payments on the supply of public services related to people’s livelihood by using the provincial panel data from 2008 to 2020. The findings show that vertical fiscal imbalance has a significant inhibitory effect on improving the level of livelihood-orientated public service supply, that local government fiscal expenditure bias is its main path of action, and that the influencing effect is heterogeneous in different types of livelihood-orientated public services. While transfer payment has a positive incentive effect on livelihood-orientated public service supply, transfer payment can also strengthen the negative impact of vertical fiscal imbalance on the level of livelihood-orientated public service provision by reducing the tax efforts of local governments. In view of this, it is necessary to optimize the relationship of financial power and office power between the central government and local governments, improve the transfer payment system, improve the performance appraisal system of officials and other measures, so as to alleviate the contradiction of vertical fiscal imbalance, give full play to the positive incentive effect of transfer payment, and effectively improve the level of livelihood-orientated public service provision.

Key words: fiscal decentralization, vertical fiscal imbalance, transfer payments, the supply of livelihood-orientatedpublic services