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Fiscal Decentralization in China and India: Competitive, Cooperative or Market Preserving Federalism?

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  • Singh, Nirvikar

Abstract

This paper provides a comparative assessment of fiscal decentralization in China and India, including the standard components of expenditure and revenue assignments and institutions for intergovernmental transfers, as well as the nature of subnational authorities over general economic activity. In particular, the case of China, where town and village enterprises have been very active, is contrasted with that of India, where local governments remain circumscribed in their authority, despite decentralizing reforms. The implications of differences in decentralization for fiscal outcomes and economic growth are discussed. The characterization of each country in terms of concepts of federalism, i.e., competitive, cooperative and market preserving federalism, is discussed, in attempting to abstract from the two cases to more general lessons for fiscal decentralization.

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Paper provided by Department of Economics, UC Santa Cruz in its series Santa Cruz Department of Economics, Working Paper Series with number qt76d8b4hm.

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Date of creation: 01 Jan 2007
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Handle: RePEc:cdl:ucscec:qt76d8b4hm

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Keywords: cooperative federalism; competitive federalism; market-preserving federalism; decentralization; economic development.;

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  1. Pranab Bardhan & Dilip Mookherjee, 2006. "Pro-Poor Targeting and Accountability of Local Governments in West Bengal," Working Papers, eSocialSciences id:773, eSocialSciences.
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  4. Jorge Martinez-Vazquez & Mark Rider, 2005. "Fiscal Decentralization and Economic Growth: A Comparative Study of China and India," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0519, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  5. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1143-62, December.
  6. Jing Jin & Heng-fu Zou, 2003. "Soft Budget Constraints on Local Government in China," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 132, China Economics and Management Academy, Central University of Finance and Economics.
  7. Abhijit Banerjee & Lakshmi Iyer, 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 1190-1213, September.
  8. Bardhan, Pranab & Mookherjee, Dilip, 2005. "Decentralizing antipoverty program delivery in developing countries," Journal of Public Economics, Elsevier, Elsevier, vol. 89(4), pages 675-704, April.
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  10. Rao, M. Govinda & Singh, Nirvikar, 2006. "The Political Economy of India’s Fiscal Federal System and its Reform," MPRA Paper, University Library of Munich, Germany 1279, University Library of Munich, Germany.
  11. Yingyi Qian & Barry R. Weingast, 1996. "China's transition to markets: market-preserving federalism, chinese style," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 1(2), pages 149-185.
  12. Abhijit Banerjee & Lakshmi Iyer & Rohini Somanathan, 2005. "History, Social Divisions, and Public Goods in Rural India," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(2-3), pages 639-647, 04/05.
  13. AfDB AfDB, . "AfDB Group Annual Report 2005," Annual Report, African Development Bank, African Development Bank, number 61 edited by Koua Louis Kouakou, 9.
  14. Abhijit Banerjee & Rohini Somanathan, 2004. "The political economy of public goods: Some evidence from India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers, Indian Statistical Institute, New Delhi, India 04-17, Indian Statistical Institute, New Delhi, India.
  15. Galeotti, Gianluigi & Breton, Albert, 1986. "An Economic Theory of Political Parties," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 39(1), pages 47-65.
  16. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, Elsevier, vol. 89(9-10), pages 1719-1742, September.
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Cited by:
  1. Singh, Nirvikar & Srinivasan, T.N., 2006. "Federalism and economic development in India: An assessment," MPRA Paper, University Library of Munich, Germany 12452, University Library of Munich, Germany, revised Aug 2008.
  2. Nirvikar Singh, 2007. "The dynamics of reform of India’s federal system," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 8(1), pages 22-31, 04.
  3. Singh, Nirvikar, 2007. "The Dynamics of Reform of India’s Federal System," Santa Cruz Department of Economics, Working Paper Series, Department of Economics, UC Santa Cruz qt9gh5p65t, Department of Economics, UC Santa Cruz.

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