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Impact of fiscal transfer on fiscal effort of Chinese provincial governments

Author

Listed:
  • ZHANG Henglong

    (China Research Center for Government Efficiency, Shanghai University, Shanghai 200444, China)

  • WU Hao

    (School of International Business and Management, Shanghai University, Shanghai University, Shanghai 200444, China)

Abstract

An ideal scheme of intergovernmental transfer should be determined by equalization and efficiency with taking account of fiscal effort of local governments. In this regard, this paper provides a comprehensive review of Chinese transfer system since the decentralized taxation system (DTS) starting from 1994. To begin with, we make numerical analysis on equalization in economic and fiscal aspects since the 1994 DTS reform. A Panel Data model is then developed to analyze correlations between each of three types of transfer and fiscal effort of provincial governments based on Chinese experience during 1994–2006. The authors further research respective situation of eastern, middle and western parts of China and finally draw a conclusion through the above analysis that the current fiscal transfer system does not tangibly contribute towards improving fiscal effort devoted by local governments. In addition to that, it even has a somewhat counter-equalizing effect.

Suggested Citation

  • ZHANG Henglong & WU Hao, 2009. "Impact of fiscal transfer on fiscal effort of Chinese provincial governments," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(3), pages 406-424, September.
    • Handle: RePEc:fec:journl:v:4:y:2009:i:3:p:406-424
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-009-0022-3
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    Keywords

    fiscal transfer£¬fiscal effort£¬equalization;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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