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The incentive role of creating "cities" in China

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  • Li, Lixing

Abstract

China operated an urbanization policy by which counties could be given city status between 1983 and 1997. The policy had substantial impacts on the new administrative entities, including more discretionary power and fiscal independence. Such "county-to-city upgrading" provided the central government with an instrument to reward localities. Using a large dataset covering all counties during 1993-1997, I show that upgrading is not an automatic procedure that endorses the high urbanization levels in existing counties. Although official guidelines for upgrading counties to cities were published, these requirements were largely ignored in practice. Instead, economic growth rate was the key factor in determining which counties obtained city status. This paper interprets the creation of county-level cities through upgrading as part of the incentive structure of Chinese local officials. The importance of both fiscal and political incentives facing the local government in promoting economic growth is highlighted.

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Bibliographic Info

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 22 (2011)
Issue (Month): 1 (March)
Pages: 172-181

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Handle: RePEc:eee:chieco:v:22:y:2011:i:1:p:172-181

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Web page: http://www.elsevier.com/locate/chieco

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Keywords: Incentive mechanism Economic growth Regional competition Urbanization China;

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References

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Citations

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Cited by:
  1. Che, Yi, 2009. "Mismatch: land reallocations, recovery land rental and land rental market development in rural China," MPRA Paper 39794, University Library of Munich, Germany.
  2. Xu, Cheng-Gang, 2010. "The Institutional Foundations of China’s Reforms and Development," CEPR Discussion Papers 7654, C.E.P.R. Discussion Papers.
  3. Emilie CALDEIRA, 2010. "Yardstick competition in a Federation: Theory and Evidence from China," Working Papers 201018, CERDI.
  4. Fan, Shenggen & Li, Lixing & Zhang, Xiaobo, 2012. "Challenges of creating cities in China: Lessons from a short-lived county-to-city upgrading policy," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 476-491.
  5. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.

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