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Rural tax reform and the extractive capacity of local state in China

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  • LIU, Mingxing
  • XU, Zhigang
  • SU, Fubing
  • TAO, Ran
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    Abstract

    China's fiscal arrangement in the 1980s has preserved local governments' incentive but the 1994 fiscal reform recentralized revenues. Since then, farmers' tax burdens have risen steeply and become a major challenge to the state legitimacy. How to account for the huge regional variation? Why were some localities able to tax more heavily than others? Based on a national survey of village governance in China, we examine farmers' burdens empirically and identify political and social factors that explain the local governments' ability to tax farmers. This paper suggests that developments since the 1990s have shown that it overstates local discretionary power and does not pay enough attention to societal forces in understanding local public finance.

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    Bibliographic Info

    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 23 (2012)
    Issue (Month): 1 ()
    Pages: 190-203

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    Handle: RePEc:eee:chieco:v:23:y:2012:i:1:p:190-203

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

    Related research

    Keywords: Central–local relations; Local public finance; Farmers' burdens; Rural Tax reform; China;

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    References

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    1. Frederic S. Mishkin & Miguel A. Savastano, 2000. "Monetary Policy Strategies for Latin America," NBER Working Papers 7617, National Bureau of Economic Research, Inc.
    2. Huang,Yasheng, 1996. "Inflation and Investment Controls in China," Cambridge Books, Cambridge University Press, number 9780521554831, April.
    3. Hehui Jin & Yingyi Qian & Barry Weingast, 1999. "Regional Decentralization and Fiscal Incentives: Federalism, Chinese Style," Working Papers 99013, Stanford University, Department of Economics.
    4. Pesqué-Cela, Vanesa & Tao, Ran & Liu, Yongdong & Sun, Laixiang, 2009. "Challenging, complementing or assuming 'the Mandate of Heaven'? Political distrust and the rise of self-governing social organizations in rural China," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 151-168, March.
    5. Roy, Indrajit, 2008. "Civil Society and Good Governance: (Re-) Conceptualizing the Interface," World Development, Elsevier, vol. 36(4), pages 677-705, April.
    6. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
    7. White, Gordon & Howell, Jude A. & Shang Xiaoyuan,, 1996. "In Search of Civil Society: Market Reform and Social Change in Contemporary China," OUP Catalogue, Oxford University Press, number 9780198289562, September.
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    Cited by:
    1. Mu, Ren & Zhang, Xiaobo, 2014. "Do elected leaders in a limited democracy have real power? Evidence from rural China," Journal of Development Economics, Elsevier, vol. 107(C), pages 17-27.
    2. Song, Yang, 2013. "Rising Chinese regional income inequality: The role of fiscal decentralization," China Economic Review, Elsevier, vol. 27(C), pages 294-309.
    3. Chen, Shuzhang & Oxley, Les & Xu, Zheng & Wang, Yanqing & Ma, Hengyun, 2013. "The dynamic adjustment of factor inputs and its policy implications for major wheat producing areas in China," Economic Modelling, Elsevier, vol. 33(C), pages 450-457.

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