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Fiscal Decentralisation and Local Public Good Provision in China

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  • Xin-Qiao Ping

    (China Centre for Economic Research)

  • Jie Bai
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    Abstract

    Fiscal incentive is closely related with the extra-budgetary revenues. Based on our definition of 'fiscal incentive', we explore the impacts of fiscal incentives under decentralisation on responsiveness of public good provision to real local needs. There are also some problems in fiscal decentralisation in China : first, with a huge basis of extra-budgetary revenue, the size of local government would be expanded, resulting in a heavier burden on the shoulder of local citizens and peasants; second, there exist some decreasing return to scale in local extra-budgetary expenditure; thirdly, 'urbanisation' (measured as the ratio of rural population to the total population) is negatively correlated with the local extra-budgetary expenditure on urban maintenance, indicating that in China, the process of industrialisation and urban construction are not consistent.

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    File URL: http://www.eaber.org/node/22027
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    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22027.

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    Date of creation: Jun 2005
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    Handle: RePEc:eab:financ:22027

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    Related research

    Keywords: Fiscal decentralisation; local public good provision; fiscal incentives;

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    References

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    1. Shleifer, Andrei, 1997. "Government in transition," European Economic Review, Elsevier, Elsevier, vol. 41(3-5), pages 385-410, April.
    2. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, Elsevier, vol. 76(3), pages 369-397, June.
    3. KEEN, Michael & MARCHAND, Maurice, 1996. "Fiscal Competition and the Pattern of Public Spending," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1996001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, Elsevier, vol. 88(3-4), pages 867-893, March.
    5. Zhang, Xiaobo & Fan, Shenggen & Zhang, Linxiu & Huang, Jikun, 2004. "Local governance and public goods provision in rural China," Journal of Public Economics, Elsevier, Elsevier, vol. 88(12), pages 2857-2871, December.
    6. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(4), pages 83-92, Fall.
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    Cited by:
    1. Firth, Michael & Gong, Stephen X. & Shan, Liwei, 2013. "Cost of government and firm value," Journal of Corporate Finance, Elsevier, Elsevier, vol. 21(C), pages 136-152.

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