The Role of Provincial Policies in Fiscal Equalization Outcomes in China
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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