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Fiscal decentralization and the imbalance between consumption and investment in China

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  • Liangliang Liu

    (Nanjing University of Finance and Economics)

Abstract

This research aims to explore the influences of fiscal decentralization on the imbalance between consumption and investment from theoretical and empirical perspectives. First, it analyzes how fiscal decentralization affects the ratio of consumption to investment under the framework of endogenous growth theory. Findings demonstrate that fiscal decentralization and the ratio of consumption to investment display a U-shaped relationship. Then, it empirically explores this question with a panel of 31 administrative regions in China from 1998 to 2015. Findings further show that empirical results verify the correctness of the theoretical results. Results are tested for robustness using different methods. A clear understanding of this project may help the central government in China as well as local governments to determine the reasonable rate of consumption to investment via fiscal means.

Suggested Citation

  • Liangliang Liu, 2021. "Fiscal decentralization and the imbalance between consumption and investment in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 1-17, February.
    • Handle: RePEc:spr:anresc:v:66:y:2021:i:1:d:10.1007_s00168-020-01006-1
    DOI: 10.1007/s00168-020-01006-1
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    More about this item

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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