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Fiscal decentralization, public spending, and economic growth in China

  • Zhang, Tao
  • Zou, Heng-fu

This study of China demonstrates how the allocation of fiscal resources between the central and local governments has affected economic growth since reforms began in the late 1970s. We find that a higher degree of fiscal decentralization of government spending is associated with lower provincial economic growth over the past fifteen years. This consistently significant and robust result in our empirical examinations is surprising in light of the argument that fiscal decentralization usually makes a positive contribution to local economic growth.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 67 (1998)
Issue (Month): 2 (February)
Pages: 221-240

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Handle: RePEc:eee:pubeco:v:67:y:1998:i:2:p:221-240
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  2. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  3. Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
  4. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  5. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
  6. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  7. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
  8. Zou Heng-fu, 1994. "Dynamic Effects of Federal Grants on Local Spending," Journal of Urban Economics, Elsevier, vol. 36(1), pages 98-115, July.
  9. Bird, Richard & Wallich, Christine, 1993. "Fiscal decentralization and intergovernmental relations in transition economics : toward a systematic framework of analysis," Policy Research Working Paper Series 1122, The World Bank.
  10. Prud'homme, Remy, 1995. "The Dangers of Decentralization," World Bank Research Observer, World Bank Group, vol. 10(2), pages 201-20, August.
  11. Edward M. Gramlich & Harvy Galper, 1973. "State and Local Fiscal Behavior and Federal Grant Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 15-66.
  12. Heng-fu Zou, 1994. "Taxes, Federal Grants, Local Public Spending, and Growth," CEMA Working Papers 78, China Economics and Management Academy, Central University of Finance and Economics.
  13. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  14. Bahl, Roy W. & Wallich, Christine, 1992. "Intergovernmental fiscal relations in China," Policy Research Working Paper Series 863, The World Bank.
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