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The growth impact of intersectoral and intergovernmental allocation of public expenditure: With applications to China and India

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Author Info

  • Tao Zhang

    (Guanghua School of Management, Peking University
    Institute for Advanced Studies, Wuhan University)

  • Heng-fu Zou

    (Development Research Group, World Bank)

Abstract

The negative association between fiscal decentralization and provincial economic growth has been found to be consistently significant and robust in China. For India, however, we have found that fiscal decentralization is positively, and even statistically significantly, associated with state economic growth. The state allocation of public spending in various sectors is broadly consistent with ¡°growth maximizing,¡± whereas increases in the central allocation of its budget among development projects, nondevelopment projects, and social and community services by cutting the center's spending on all other functions can promote regional growth.

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Bibliographic Info

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 30.

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Date of creation: 04 Aug 2000
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Publication status: Published in China Economic Review, Volume 12, Issue 1, Spring 2001, Pages 58-81
Handle: RePEc:cuf:wpaper:30

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Web page: http://cema.cufe.edu.cn/
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Keywords: Fiscal decentralization; Public spending; Growth; Chinese economy; Indian economy;

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  1. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  2. Tao Zhang & Heng-fu Zou, 2001. "Fiscal decentralization, public spending, and economic growth in China," CEMA Working Papers 58, China Economics and Management Academy, Central University of Finance and Economics.
  3. Heng-fu Zou, 1994. "Taxes, Federal Grants, Local Public Spending, and Growth," CEMA Working Papers 78, China Economics and Management Academy, Central University of Finance and Economics.
  4. Danyang Xie & Heng-fu Zou & Hamid Davoodi, 1999. "Fiscal Decentralization and Economic Growth in the United States," CEMA Working Papers 109, China Economics and Management Academy, Central University of Finance and Economics.
  5. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  6. Ram Agarwala & Raja Chellia & Toshi Fujiwara & Yan Wang & Heng-fu Zou, 1993. "China: reforming intergovernmental fiscal relations," CEMA Working Papers 475, China Economics and Management Academy, Central University of Finance and Economics.
  7. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  8. Bird, Richard & Wallich, Christine, 1993. "Fiscal decentralization and intergovernmental relations in transition economics : toward a systematic framework of analysis," Policy Research Working Paper Series 1122, The World Bank.
  9. Hamid Davoodi & Heng-fu Zou, 1996. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," CEMA Working Papers 98, China Economics and Management Academy, Central University of Finance and Economics.
  10. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
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