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Rural tax reform and the extractive capacity of local state in China

  • LIU, Mingxing
  • XU, Zhigang
  • SU, Fubing
  • TAO, Ran
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    China's fiscal arrangement in the 1980s has preserved local governments' incentive but the 1994 fiscal reform recentralized revenues. Since then, farmers' tax burdens have risen steeply and become a major challenge to the state legitimacy. How to account for the huge regional variation? Why were some localities able to tax more heavily than others? Based on a national survey of village governance in China, we examine farmers' burdens empirically and identify political and social factors that explain the local governments' ability to tax farmers. This paper suggests that developments since the 1990s have shown that it overstates local discretionary power and does not pay enough attention to societal forces in understanding local public finance.

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    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 23 (2012)
    Issue (Month): 1 ()
    Pages: 190-203

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    Handle: RePEc:eee:chieco:v:23:y:2012:i:1:p:190-203
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    1. Pesqué-Cela, Vanesa & Tao, Ran & Liu, Yongdong & Sun, Laixiang, 2009. "Challenging, complementing or assuming 'the Mandate of Heaven'? Political distrust and the rise of self-governing social organizations in rural China," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 151-168, March.
    2. Frederic S. Mishkin & Miguel A. Savastano, 2000. "Monetary Policy Strategies for Latin America," NBER Working Papers 7617, National Bureau of Economic Research, Inc.
    3. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1719-1742, September.
    4. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
    5. Roy, Indrajit, 2008. "Civil Society and Good Governance: (Re-) Conceptualizing the Interface," World Development, Elsevier, vol. 36(4), pages 677-705, April.
    6. White, Gordon & Howell, Jude A. & Shang Xiaoyuan,, 1996. "In Search of Civil Society: Market Reform and Social Change in Contemporary China," OUP Catalogue, Oxford University Press, number 9780198289562.
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