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Fiscal Centralisation and Decentralisation in Russia and China

Author

Listed:
  • Elliott Parker

    (Department of Economics, University of Nevada, Reno, AB 319-C, Reno, NV 89557-0207, USA)

  • Judith Thornton

    () (Department of Economics, University of Washington, Box 353330, Condon 408, Seattle, WA 98195, USA.)

Abstract

We review the fiscal evolution of China and Russia and how the process of creating a separate tax-financed public sector in the two countries differed. China's fiscal budget was consistently smaller than in Russia, and their fiscal decentralisation was consistently greater. In China, local governments that were allowed to keep marginal increases in local tax revenue had incentives to pursue growth-supporting policies, but the absence of financial markets and barriers to investment resulted in protectionism and inefficient use of capital. Interregional fiscal transfers from the centre provided modest fiscal equalisation in China, but not in Russia. Russia's status as a petro-state makes efficient management of the public sector particularly difficult. Rising world energy prices and resource rents have generated growing federal budget surpluses, and fiscal recentralisation has been associated with expanding state control in other areas. Comparative Economic Studies (2007) 49, 514–542. doi:10.1057/palgrave.ces.8100225

Suggested Citation

  • Elliott Parker & Judith Thornton, 2007. "Fiscal Centralisation and Decentralisation in Russia and China," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(4), pages 514-542, December.
  • Handle: RePEc:pal:compes:v:49:y:2007:i:4:p:514-542
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    References listed on IDEAS

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    Cited by:

    1. ROZELLE, Scott & SWINNEN, Johan F.M., 2009. "Why did the communist party reform in China, but not in the Soviet Union? The political economy of agricultural transition," China Economic Review, Elsevier, vol. 20(2), pages 275-287, June.
    2. Barbara Krug & Alexander Libman, 2015. "Commitment to local autonomy in non-democracies: Russia and China compared," Constitutional Political Economy, Springer, vol. 26(2), pages 221-245, June.

    More about this item

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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