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Did China's Tax-for-Fee Reform Improve Farmers' Welfare in Rural Areas?

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  • James Alm

    ()
    (Department of Economics, Tulane University)

  • Yongzheng Liu

    ()
    (Department of Economics, Andrew Young School of Policy Studies, Georgia State University)

Abstract

China enacted a rural tax reform – the "Tax-for-Fee Reform" (TFR) – in the late 1990s. A crucial but unanswered question is whether this reform improved farmers' welfare in rural areas. This paper uses village-level survey data from the Chinese Household Income Project in order to examine the effect of the TFR on farmers' direct and indirect welfare. We find no evidence that the direct welfare effects improved farmer's net income. In contrast, the reform appears to have reduced the villages' financing capacity, and hence to have lowered their overall expenditures. These indirect effects have had significant negative impacts on farmers' welfare.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1305.pdf
File Function: First Version, February 2013
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1305.

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Length: 37 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:tul:wpaper:1305

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Keywords: tax-for-fee reform; inequality; rural China;

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