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Determinants of government size: evidence from China

  • Alfred Wu


  • Mi Lin


This paper investigates the determinants of government size at the provincial level in China. We employ the panel data model as a platform for empirical analysis and control for endogeneity in the study. Our study shows that openness to trade and foreign direct investment (FDI) may curtail government expansion, and that the provincial-level public sector is characterized by economies of scale. This study also documents that Wagner’s law does not hold true for China. Moreover, both expenditure decentralization and revenue decentralization contribute to the expansion of China’s government.

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Article provided by Springer in its journal Public Choice.

Volume (Year): 151 (2012)
Issue (Month): 1 (April)
Pages: 255-270

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Handle: RePEc:kap:pubcho:v:151:y:2012:i:1:p:255-270
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  1. Matthew Cole & Robert Elliott & Jing Zhang, 2009. "Corruption, Governance and FDI Location in China: A Province-Level Analysis," Journal of Development Studies, Taylor & Francis Journals, vol. 45(9), pages 1494-1512.
  2. De Witte, Kristof & Moesen, Wim, 2009. "Sizing the Government," MPRA Paper 14785, University Library of Munich, Germany.
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  9. Chien-Hsun Chen, 2004. "Fiscal decentralization, collusion and government size in China's transitional economy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(11), pages 699-705.
  10. Ferris, J. Stephen & Park, Soo-Bin & Winer, Stanley L., 2008. "Studying the role of political competition in the evolution of government size over long horizons," POLIS Working Papers 111, Institute of Public Policy and Public Choice - POLIS.
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  17. Ehdaie, Jaber, 1994. "Fiscal decentralization and the size of the government : an extension with evidence from cross-country data," Policy Research Working Paper Series 1387, The World Bank.
  18. Sunday Osaretin Iyare & Troy Lorde, 2004. "Co-integration, causality and Wagner's law: tests for selected Caribbean countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(13), pages 815-825.
  19. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
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  21. Gelb, A & Knight, John B & Sabot, R H, 1991. "Public Sector Employment, Rent Seeking and Economic Growth," Economic Journal, Royal Economic Society, vol. 101(408), pages 1186-99, September.
  22. Emmanuel Ziramba, 2008. "Wagner'S Law: An Econometric Test For South Africa, 1960-2006," South African Journal of Economics, Economic Society of South Africa, vol. 76(4), pages 596-606, December.
  23. Sinha, Dipendra, 2007. "Does the Wagner’s Law hold for Thailand? A Time Series Study," MPRA Paper 2560, University Library of Munich, Germany.
  24. Akitoby, Bernardin & Clements, Benedict & Gupta, Sanjeev & Inchauste, Gabriela, 2006. "Public spending, voracity, and Wagner's law in developing countries," European Journal of Political Economy, Elsevier, vol. 22(4), pages 908-924, December.
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  26. repec:cup:cbooks:9780521894753 is not listed on IDEAS
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