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The Role of Provincial Policies in Fiscal Equalization Outcomes in China

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Abstract

In this paper, we use pooled data for central-provincial and provincial-local governments in 2000-01, overall involving over 4000 sub-provincial governments, to assess China 's sub-national fiscal equalization practices and outcomes. Our goal is to explain horizontal fiscal disparities between and within provinces, with a special focus on the role played by intermediate-level governments, particularly the provincial governments, on overall equalization outcomes in China . The significant policy implication of our findings is that if the goal of the central government is to improve equity in the distribution of fiscal resources throughout the entire national territory, it will not be enough to improve the design and size of central-provincial transfers. There will be a need to re-structure and control the structure and practices of provincial-local government transfers.

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  • Jorge Martinez-Vazquez & Baoyun Qiao & Li Zhang, 2007. "The Role of Provincial Policies in Fiscal Equalization Outcomes in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0705, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0705
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp0705.pdf
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    References listed on IDEAS

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    1. Jorge Martinez & Baoyun Qian & Shuilin Wang & Heng-fu Zou, 2006. "Local Public Finance in China: Challenges and Policy Options," CEMA Working Papers 549, China Economics and Management Academy, Central University of Finance and Economics.
    2. Martinez-Vazquez, Jorge & Timofeev, Andrey, 2008. "Regional-local dimension of Russia's fiscal equalization," Journal of Comparative Economics, Elsevier, vol. 36(1), pages 157-176, March.
    3. Zhihua Zhang & Jorge Martinez-Vazquez, 2003. "The System of Equalization Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
    5. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Brueckner, Jan K, 1999. " Fiscal Federalism and Capital Accumulation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(2), pages 205-224.
    7. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
    8. Bahl, Roy W. & Wallich, Christine, 1992. "Intergovernmental fiscal relations in China," Policy Research Working Paper Series 863, The World Bank.
    9. Bird, Richard M. & Smart, Michael, 2002. "Intergovernmental Fiscal Transfers: International Lessons for Developing Countries," World Development, Elsevier, vol. 30(6), pages 899-912, June.
    10. International Monetary Fund, 2000. "Government Spending, Rights, and Civil Liberties," IMF Working Papers 00/205, International Monetary Fund.
    11. Brennan, Geoffrey & Buchanan, James M., 1978. "Tax instruments as constraints on the disposition of public revenues," Journal of Public Economics, Elsevier, vol. 9(3), pages 301-318, June.
    12. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
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    Cited by:

    1. Wu, Alfred M. & Wang, Wen, 2013. "Determinants of Expenditure Decentralization: Evidence from China," World Development, Elsevier, vol. 46(C), pages 176-184.
    2. Jorge Martinez-Vazquez & Baoyun Qiao, 2010. "Expenditure Assignments in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1028, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Huang, Bihong & Chen, Kang, 2012. "Are intergovernmental transfers in China equalizing?," China Economic Review, Elsevier, vol. 23(3), pages 534-551.
    4. Yongzheng Liu & Jorge Martinez-Vazquez & Baoyun Qiao, 2014. "Falling Short: Intergovernmental Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1423, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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    Keywords

    Fiscal Equalization; central-Provincial; China; sub-national fiscal equalization;

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