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China's Tax-for-Fee Reform and Village Inequality

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  • James Alm
  • Yongzheng Liu

Abstract

In the late 1990s, China enacted a rural tax reform known as the "Tax-for-Fee Reform" (TFR), largely driven by a desire to address farmers' complaints about what they perceived as a heavy and regressive tax burden. This study examines the impact of the TFR on inequality in rural villages in China. Our results suggest that the TFR plays an effective role in reducing inequality within villages. Its impact on a consumption-based measure of inequality took effect immediately; its impact on per capita household income inequality took somewhat longer. Our results also suggest that it was "rich" and/or "coastal" villages that exhibited a significant reduction of inequality as a result of the TFR, whereas "poor" and/or "inland" villages experienced no significant changes in inequality from the reform.

Suggested Citation

  • James Alm & Yongzheng Liu, 2014. "China's Tax-for-Fee Reform and Village Inequality," Oxford Development Studies, Taylor & Francis Journals, vol. 42(1), pages 38-64, March.
  • Handle: RePEc:taf:oxdevs:v:42:y:2014:i:1:p:38-64
    DOI: 10.1080/13600818.2013.833180
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    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • I2 - Health, Education, and Welfare - - Education
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions

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