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Local Government Finance and Industrial Policy in China


  • Heady, Christopher


The paper considers the way in which the system of local government finance in China affects the design of local industrial policy. It starts by using recently collected data from selected cities to demonstrate the importance of indirect taxes for financing local services. It then presents a theoretical model which shows how the financing system can lead local governments to distort local industrial structure. Finally, it uses this model to consider whether the 1994 tax reforms can be expected to reduce these distortions. Copyright 1998 by Kluwer Academic Publishers

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  • Heady, Christopher, 1998. "Local Government Finance and Industrial Policy in China," Economic Change and Restructuring, Springer, vol. 31(2-3), pages 195-212.
  • Handle: RePEc:kap:ecopln:v:31:y:1998:i:2-3:p:195-212

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    References listed on IDEAS

    1. Munk, Knud Jorgen, 1978. " Optimal Taxation and Pure Profit," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(1), pages 1-19.
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    Cited by:

    1. Singh, Nirvikar, 2007. "Fiscal Decentralization in China and India: Competitive, Cooperative or Market Preserving Federalism?," Santa Cruz Department of Economics, Working Paper Series qt76d8b4hm, Department of Economics, UC Santa Cruz.
    2. Mario Biggeri & Danilo Gambelli & Christine Phillips, 1999. "Small and medium enterprise theory: evidence for Chinese TVEs," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(2), pages 197-219.

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