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Democratic participation, fiscal reform and local governance: Empirical evidence on Chinese villages

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  • Meng, Xiangyi
  • Zhang, Li

Abstract

China's rural village elections have been acclaimed as a crucial step in China's democratization and a success in improving villagers' welfare and self-governance. Around 2002 the central government implemented another influential reform: the Tax-for-Fee reform. Using a unique two-year panel of village data from rural China covering more villages than the previous literature and spanning over these two reforms, our dual-goal in this paper is, first to evaluate the impact of village election on local governance, and second to examine the potential interplay between the Tax-for-Fee reform and the village election. We show empirically that village elections do bring about positive consequences, including the enhancement of public expenditure and the improvement in efficiency in public administration, through the check and balances provided by the villagers' representatives meetings. However, the improvement in administrative efficiency has been partly unexpectedly attenuated by the Tax-for-Fee reform. We argue that this conflict is possibly due to the Tax-for-Fee reform's tightening up the villages' budget and that with sticky administration costs, the reduction of administrative share in total expenditure has been weakened. Therefore the tax reform undermines the functioning of village democracy.

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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: 88-97

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Handle: RePEc:eee:chieco:v:22:y:2011:i:1:p:88-97

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

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Keywords: Governance Democracy Fiscal reform China;

References

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  1. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  2. Luo, Renfu & Zhang, Linxiu & Huang, Jikun & Rozelle, Scott, 2007. "Elections, fiscal reform and public goods provision in rural China," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 583-611, September.
  3. Wang, Shuna & Yao, Yang, 2007. "Grassroots Democracy and Local Governance: Evidence from Rural China," World Development, Elsevier, vol. 35(10), pages 1635-1649, October.
  4. Zhang, Xiaobo & Fan, Shenggen & Zhang, Linxiu & Huang, Jikun, 2002. "Local governance and public goods provision in rural China:," EPTD discussion papers 93, International Food Policy Research Institute (IFPRI).
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Cited by:
  1. James Alm & Yongzheng Liu, 2013. "Did China's Tax-for-Fee Reform Improve Farmers' Welfare in Rural Areas?," Working Papers 1305, Tulane University, Department of Economics.
  2. James Alm & Yongzheng Liu, 2014. "China's Tax-for-Fee Reform and Village Inequality," Oxford Development Studies, Taylor & Francis Journals, vol. 42(1), pages 38-64, March.
  3. Caldeira, Emilie, 2012. "Yardstick competition in a federation: Theory and evidence from China," China Economic Review, Elsevier, vol. 23(4), pages 878-897.

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