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The Effect of “Pressure-Type” Fiscal Incentives on Industrial Restructuring in China

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Listed:
  • Song Liying
  • Zhang Anqin

    (School of Economics and Finance of Xi’an Jiaotong University, Shanghai, China)

Abstract

The optimization and upgrading of industrial structure is the driving force to build a new development pattern and improve the quality and efficiency of economic development. China’s “pressure-type” fiscal incentives (PTFIs) are an important perspective from which the law of industrial structure change can be analyzed. Based on the dynamic panel data of 285 cities in China and the behavioral characteristics of local governments, this paper explores the effects of PTFIs on industrial restructuring using the GMM estimation method. It is found that PTFIs are conducive to improving the “quantity” of industrial structure upgrading (ISU), but not conducive to improving the “quality” of ISU or the rationalization of industrial structure (RIS). Mechanism identification reveals that, with PTFIs, local governments influence industrial restructuring mainly by “expanding financial resources with land” (EFRWL) and increasing the intensity of tax collection and management (ITCM). Further discussion reveals that a higher degree of fiscal decentralization and environmental regulation can effectively alleviate the negative impact of PTFIs on industrial restructuring. Accordingly, this paper puts forward some policy recommendations to promote the balanced development of industrial structure, such as improving the institutional conditions and standardizing the behavior of local governments.

Suggested Citation

  • Song Liying & Zhang Anqin, 2023. "The Effect of “Pressure-Type” Fiscal Incentives on Industrial Restructuring in China," China Finance and Economic Review, De Gruyter, vol. 12(1), pages 89-109, July.
    • Handle: RePEc:bpj:cferev:v:12:y:2023:i:1:p:89-109:n:4
    DOI: 10.1515/cfer-2023-0005
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