Tax-Spend, Spend-Tax, or Fiscal Synchronization: A Panel Analysis of the Chinese Provincial Real Data
AbstractIn this paper we tested whether the hypothesis of tax-spend, spend-tax, or fiscal synchronization applies to the 31 Chinese provinces using cross-sectional and time series data covering 1999 to 2005. The interaction between government revenues and government expenditures is tested with the newly developed panel unit root tests and heterogeneous panel cointegration tests. The results show that both revenues and expenditures are non-stationary but have a significant long-run relationship. The results based on multivariate panel error-correction models show that there is no significant causality between revenues and expenditures in the short run. However, in the long-run, a bi-directional causality exists between revenues and expenditures, thus supporting the fiscal synchronization hypothesis for 31 Chinese provinces over this sample period.
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Bibliographic InfoArticle provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.
Volume (Year): 5 (2009)
Issue (Month): 2 (July)
tax-spend; spend-tax; fiscal synchronization; panel cointegration;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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