IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2019i1p103-d300652.html
   My bibliography  Save this article

Fiscal Incentives and Sustainable Urbanization: Evidence from China

Author

Listed:
  • Li Ji

    (Business School, University of Shanghai for Science and Technology, No.516 Jungong Road, Shanghai 200093, China)

  • Wei Zhang

    (School of Social Development, East China University of Political Science and Law, No.555 Longyuan Road, Shanghai 201620, China)

Abstract

Fiscal incentives can affect governments’ behavior and further influence economic and social development. Due to the specific conditions of the household registration system and the land ownership system in China, the urbanization process is dominated by the government. This article conceptually and empirically investigates the influence of fiscal incentives on sustainable urbanization. We theoretically analyze the fiscal reasons why land urbanization occurs faster than the population urbanization. Then we employ panel data of 30 provinces and autonomous regions in China from 2000 to 2012 to discuss the impact of fiscal incentives on urbanization from four aspects: fiscal revenue, types of taxes, fiscal self-financing rate, and tax losses. The econometric results show that both the local tax revenue and fiscal self-financing rate have a significantly negative effect on the gap between land urbanization and population urbanization. The larger the proportion of business tax, the smaller the gap, and vice versa for value-added tax. The greater the local governments’ tax losses, the greater the gap. The results explain why local governments in China choose land urbanization rather than population urbanization from the perspective of fiscal incentives.

Suggested Citation

  • Li Ji & Wei Zhang, 2019. "Fiscal Incentives and Sustainable Urbanization: Evidence from China," Sustainability, MDPI, vol. 12(1), pages 1-12, December.
    • Handle: RePEc:gam:jsusta:v:12:y:2019:i:1:p:103-:d:300652
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/1/103/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/12/1/103/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
    2. Deng, Xiangzheng & Huang, Jikun & Rozelle, Scott & Uchida, Emi, 2008. "Growth, population and industrialization, and urban land expansion of China," Journal of Urban Economics, Elsevier, vol. 63(1), pages 96-115, January.
    3. Moomaw, Ronald L. & Shatter, Ali M., 1996. "Urbanization and Economic Development: A Bias toward Large Cities?," Journal of Urban Economics, Elsevier, vol. 40(1), pages 13-37, July.
    4. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    6. George Lin, 2009. "Scaling-up Regional Development in Globalizing China: Local Capital Accumulation, Land-centred Politics, and Reproduction of Space," Regional Studies, Taylor & Francis Journals, vol. 43(3), pages 429-447.
    7. Chengri Ding & Erik Lichtenberg, 2011. "Land And Urban Economic Growth In China," Journal of Regional Science, Wiley Blackwell, vol. 51(2), pages 299-317, May.
    8. Karen C. Seto & Robert K. Kaufmann, 2003. "Modeling the Drivers of Urban Land Use Change in the Pearl River Delta, China: Integrating Remote Sensing with Socioeconomic Data," Land Economics, University of Wisconsin Press, vol. 79(1), pages 106-121.
    9. Henderson, Vernon, 2003. "The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, vol. 8(1), pages 47-71, March.
    10. Yingyi Qian & Chenggang Xu, 1993. "Why China's economic reforms differ: the M‐form hierarchy and entry/expansion of the non‐state sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(2), pages 135-170, June.
    11. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    12. Hermanus S. Geyer & Thomas Kontuly, 1993. "A Theoretical Foundation for the Concept of Differential Urbanization," International Regional Science Review, , vol. 15(2), pages 157-177, August.
    13. Paul Cheshire, 1995. "A New Phase of Urban Development in Western Europe? The Evidence for the 1980s," Urban Studies, Urban Studies Journal Limited, vol. 32(7), pages 1045-1063, August.
    14. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-1162, December.
    15. Lichtenberg, Erik & Ding, Chengri, 2009. "Local officials as land developers: Urban spatial expansion in China," Journal of Urban Economics, Elsevier, vol. 66(1), pages 57-64, July.
    16. Pandey, S M, 1977. "Nature and Determinants of Urbanization in a Developing Economy: The Case of India," Economic Development and Cultural Change, University of Chicago Press, vol. 25(2), pages 265-278, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.
    2. Gilles Duranton, 2008. "Viewpoint: From cities to productivity and growth in developing countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 689-736, August.
    3. Wan, Guanghua & Luo, Zhi & Zhang, Xun, 2017. "Urbanizing with Equity Consideration," ADBI Working Papers 642, Asian Development Bank Institute.
    4. Frederick van der Ploeg & Steven Poelhekke, 2008. "Globalization and the rise of mega-cities in the developing world," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 1(3), pages 477-501.
    5. William C. Strange, 2009. "Viewpoint: Agglomeration research in the age of disaggregation," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 1-27, February.
    6. Sabyasachi Tripathi, 2021. "Do macroeconomic factors promote urbanization? Evidence from BRICS countries," Asia-Pacific Journal of Regional Science, Springer, vol. 5(2), pages 397-426, June.
    7. Giray Gozgor & Baris Kablamaci, 2015. "What happened to urbanization in the globalization era? An empirical examination for poor emerging countries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 533-553, December.
    8. Christensen, Peter & McCord, Gordon C., 2016. "Geographic determinants of China's urbanization," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 90-102.
    9. Marius Brülhart, 2011. "The spatial effects of trade openness: a survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(1), pages 59-83, April.
    10. Wanfu Jin & Chunshan Zhou & Shijie Li & Guojun Zhang, 2021. "Factors affecting newly increased construction land at different development stages: Evidence from 352 Chinese cities," Environment and Planning B, , vol. 48(2), pages 358-375, February.
    11. J. Vernon Henderson, 2010. "Cities And Development," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 515-540, February.
    12. Canfei He & Zhiji Huang & Rui Wang, 2014. "Land use change and economic growth in urban China: A structural equation analysis," Urban Studies, Urban Studies Journal Limited, vol. 51(13), pages 2880-2898, October.
    13. J. Vernon Henderson, 2003. "Urbanization and Economic Development," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 275-341, November.
    14. Biller, Dan & Andres, Luis & Cuberes, David, 2014. "A dynamic spatial model of rural-urban transformation with public goods," Policy Research Working Paper Series 7051, The World Bank.
    15. Rochna Arora & Baljit Kaur, 2022. "Is Urbanisation Sans Infrastructure A Myth? Evidence From India," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(232), pages 81-104, January –.
    16. Jordan Rappaport & Jeffrey D. Sachs, 2001. "The U.S. as a coastal nation," Research Working Paper RWP 01-11, Federal Reserve Bank of Kansas City.
    17. Tang, Peng & Feng, Yue & Li, Min & Zhang, Yanyan, 2021. "Can the performance evaluation change from central government suppress illegal land use in local governments? A new interpretation of Chinese decentralisation," Land Use Policy, Elsevier, vol. 108(C).
    18. Michael Storper, 2010. "Agglomeration, Trade, And Spatial Development: Bringing Dynamics Back In," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 313-342, February.
    19. Maparu, Tuhin Subhra & Mazumder, Tarak Nath, 2017. "Transport infrastructure, economic development and urbanization in India (1990–2011): Is there any causal relationship?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 319-336.
    20. Anthony J. Venables, 2005. "Spatial disparities in developing countries: cities, regions, and international trade," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 3-21, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:12:y:2019:i:1:p:103-:d:300652. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.