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Fiscal Decentralisation and Local Public Good Provision in China

  • Xin-Qiao Ping

    (China Centre for Economic Research)

  • Jie Bai
Registered author(s):

    Fiscal incentive is closely related with the extra-budgetary revenues. Based on our definition of 'fiscal incentive', we explore the impacts of fiscal incentives under decentralisation on responsiveness of public good provision to real local needs. There are also some problems in fiscal decentralisation in China : first, with a huge basis of extra-budgetary revenue, the size of local government would be expanded, resulting in a heavier burden on the shoulder of local citizens and peasants; second, there exist some decreasing return to scale in local extra-budgetary expenditure; thirdly, 'urbanisation' (measured as the ratio of rural population to the total population) is negatively correlated with the local extra-budgetary expenditure on urban maintenance, indicating that in China, the process of industrialisation and urban construction are not consistent.

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    File URL: http://www.eaber.org/node/22027
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    Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22027.

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    Date of creation: Jun 2005
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    Handle: RePEc:eab:financ:22027
    Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
    Web page: http://www.eaber.org

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    1. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June.
    2. Andrei Shleifer, 1996. "Government in Transition," Harvard Institute of Economic Research Working Papers 1783, Harvard - Institute of Economic Research.
    3. Keen, Michael & Marchand, Maurice, 1997. "Fiscal competition and the pattern of public spending," Journal of Public Economics, Elsevier, vol. 66(1), pages 33-53, October.
    4. Zhang, Xiaobo & Fan, Shenggen & Zhang, Linxiu & Huang, Jikun, 2002. "Local governance and public goods provision in rural China:," EPTD discussion papers 93, International Food Policy Research Institute (IFPRI).
    5. 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.
    6. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 867-893, March.
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