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Deficit Estimation and Welfare Effects after the 1994 Fiscal Reform in China: Evidence from the County Level

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  • Pengfei Zhang
  • Victor Shih

Abstract

Using simple statistical analysis of county‐level budgetary data from across all of China's counties, the present paper examines whether the post‐1994 fiscal decentralization has affected redistribution at the county‐level. The new fiscal system has been less able to narrow inter‐county dispersion in fiscal imbalances than the old one, even after taking intergovernmental transfer payments into account. Although with the post‐1994 system there has been a modest increase in per capita welfare spending in all counties on average, much of the new‐found fiscal resources have been spent on salary and administrative expenses rather than spending on public goods. Therefore, it is imperative that the reform of China's tax system is intensified.

Suggested Citation

  • Pengfei Zhang & Victor Shih, 2008. "Deficit Estimation and Welfare Effects after the 1994 Fiscal Reform in China: Evidence from the County Level," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(3), pages 22-39, May.
    • Handle: RePEc:bla:chinae:v:16:y:2008:i:3:p:22-39
    DOI: 10.1111/j.1749-124X.2008.00112.x
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    References listed on IDEAS

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    1. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    2. World Bank, 2002. "China - National Development and Sub-National Finance : A Review of Provincial Expenditures," World Bank Publications - Reports 15423, The World Bank Group.
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    Cited by:

    1. Liming Zhao & Liang Zhao & Bing-Fu Chen, 2017. "The interrelationship between defence spending, public expenditures and economic growth: evidence from China," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(6), pages 703-718, November.

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