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Rethinking government behavior: Local government self-interest and economic development quality

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  • Li, Sen
  • Li, Guangying

Abstract

This paper aims to investigate the nexus between local government self-interest and the quality of economic development by embedding them within a unified analytical framework. It first constructs a theoretical model to decompose the multifaceted interests of local governments, followed by a theoretical analysis of their various manifestations. Using panel data from 31 regional units in China spanning 2005–2020, this study conducts a baseline regression with two-way fixed effects. After implementing robustness tests and mitigating endogeneity issues through appropriate econometric strategies, the core findings remain statistically consistent. The research establishes a causal relationship between local government self-interest and economic development quality, identifies the transmission channels of this impact, explores its heterogeneous effects, and examines the temporal persistence of local government self-interest on development quality. Key conclusions are as follows: First, local government self-interest impedes the enhancement of economic development quality, with fiscal revenue and expenditure mechanisms serving as critical transmission channels for this negative effect. Second, the impact exhibits heterogeneity: in more developed regions , the adverse influence is relatively attenuated in contexts characterized by higher marketization levels, greater fiscal decentralization, and more advanced population aging.Third, this adverse effect will persist for four years.

Suggested Citation

  • Li, Sen & Li, Guangying, 2025. "Rethinking government behavior: Local government self-interest and economic development quality," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1645-1659.
    • Handle: RePEc:eee:ecanpo:v:86:y:2025:i:c:p:1645-1659
    DOI: 10.1016/j.eap.2025.04.027
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    References listed on IDEAS

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    1. Grzegorz Drozdowski & Paweł Dziekański, 2022. "Local Disproportions of Quality of Life and Their Influence on the Process of Green Economy Development in Polish Voivodships in 2010–2020," IJERPH, MDPI, vol. 19(15), pages 1-26, July.
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    6. Li, Sen & Li, Guangying, 2024. "Fiscal decentralization, government self-interest and fiscal expenditure structure bias," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1133-1147.
    7. Zhang, Haotian & Lu, Shengfeng & Chen, Sixia, 2024. "Does centralization of tax administration regulate tax competition? Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1084-1098.
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    Cited by:

    1. Jianbao Chen & Chenwei Wu, 2025. "Do Economic Growth Targets Aggravate Environmental Pollution? Evidence from China," Sustainability, MDPI, vol. 17(14), pages 1-23, July.

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