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Fiscal Centralisation and Decentralisation in Russia and China

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Author Info
Elliott Parker (Department of Economics, University of Nevada, Reno, AB 319-C, Reno, NV 89557-0207, USA)
Judith Thornton () (Department of Economics, University of Washington, Box 353330, Condon 408, Seattle, WA 98195, USA.)

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Abstract

We review the fiscal evolution of China and Russia and how the process of creating a separate tax-financed public sector in the two countries differed. China's fiscal budget was consistently smaller than in Russia, and their fiscal decentralisation was consistently greater. In China, local governments that were allowed to keep marginal increases in local tax revenue had incentives to pursue growth-supporting policies, but the absence of financial markets and barriers to investment resulted in protectionism and inefficient use of capital. Interregional fiscal transfers from the centre provided modest fiscal equalisation in China, but not in Russia. Russia's status as a petro-state makes efficient management of the public sector particularly difficult. Rising world energy prices and resource rents have generated growing federal budget surpluses, and fiscal recentralisation has been associated with expanding state control in other areas. Comparative Economic Studies (2007) 49, 514–542. doi:10.1057/palgrave.ces.8100225

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Article provided by Palgrave Macmillan Journals in its journal Comparative Economic Studies.

Volume (Year): 49 (2007)
Issue (Month): 4 (December)
Pages: 514-542
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Handle: RePEc:pal:compes:v:49:y:2007:i:4:p:514-542

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Judith Thornton & Krisztina Nagy, 2006. "The Response of Federal Transfers to Measures of Social Need in Russia's Regions," Working Papers UWEC-2007-34, University of Washington, Department of Economics. [Downloadable!]
  2. Chien-Hsun Chen, 2004. "Fiscal decentralization, collusion and government size in China's transitional economy," Applied Economics Letters, Taylor and Francis Journals, vol. 11(11), pages 699-705, September. [Downloadable!] (restricted)
  3. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June. [Downloadable!] (restricted)
  4. Zhuravskaya, Ekaterina V., 2000. "Incentives to provide local public goods: fiscal federalism, Russian style," Journal of Public Economics, Elsevier, vol. 76(3), pages 337-368, June. [Downloadable!] (restricted)
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  5. Sylviane Guillaumont Jeanneney & Ping Hua, 2004. "Why Do More Open Chinese Provinces Have Bigger Governments?," Review of International Economics, Blackwell Publishing, vol. 12(3), pages 525-542, 08. [Downloadable!] (restricted)
  6. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-62, December. [Downloadable!] (restricted)
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  7. Jack Diamond, 2002. "The New Russian Budget System: A Critical Assessment and Future Reform Agenda," IMF Working Papers 02/21, International Monetary Fund.
  8. Jin, Jing & Zou, Heng-fu, 2005. "Fiscal decentralization, revenue and expenditure assignments, and growth in China," Journal of Asian Economics, Elsevier, vol. 16(6), pages 1047-1064, December. [Downloadable!] (restricted)
  9. Richard Bird & Christine C.P.Wong, 2005. "China's Fiscal System: A Work in Progress," International Studies Program Working Paper Series, at AYSPS, GSU paper0520, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
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  10. Shah, Anwar & Shen, Chunli, 2006. "Reform of the intergovernmental transfer system in China," Policy Research Working Paper Series 4100, The World Bank. [Downloadable!]
  11. Feltenstein, Andrew & Iwata, Shigeru, 2005. "Decentralization and macroeconomic performance in China: regional autonomy has its costs," Journal of Development Economics, Elsevier, vol. 76(2), pages 481-501, April. [Downloadable!] (restricted)
  12. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan Journals, vol. 48(4), pages 8. [Downloadable!] (restricted)
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  13. Desai, Raj M. & Freinkman, Lev & Goldberg, Itzhak, 2005. "Fiscal federalism in rentier regions: Evidence from Russia," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 814-834, December. [Downloadable!] (restricted)
  14. Bai, Chong-En & Li, David Daokui & Tao, Zhigang & Wang, Yijiang, 2001. "A Multi-Task Theory of the State Enterprise Reform," CEPR Discussion Papers 2781, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Cai, Hongbin & Treisman, Daniel, 2004. "State corroding federalism," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 819-843, March. [Downloadable!] (restricted)
  16. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1719-1742, September. [Downloadable!] (restricted)
  17. Yingyi, Qian & Roland, Gerard, 1996. "The soft budget constraint in China," Japan and the World Economy, Elsevier, vol. 8(2), pages 207-223, June. [Downloadable!] (restricted)
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