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Inside Job, Chinese Style: Suspicious Use of Public Funds under Fiscal Pressure

Author

Listed:
  • Qun Bao

    (School of Economics, Nankai University, CHINA)

  • Rui Huang

    (School of Economics and Trade, Hunan University, CHINA)

  • Guoqin Pan

    (School of Economics, Nankai University, CHINA)

  • Laixun Zhao

    (Research Institute for Economics and Business Administration, Kobe University, JAPAN)

Abstract

Governments usually increase taxes or cut spending to tackle deficits. In contrast, local governments in China tend to increase suspicious uses of public funds under fiscal pressure, which is not well understood. Using the reduction of agricultural tax as a revenue shock, we find that greater fiscal pressure leads to higher questionable fund use by county governments. The suspicious activities are triggered by the motivation to reallocate resources, to fields that correlate with officials' own interests like stimulating local economic growth, pursuing personal promotion as well as grabbing resources before retirement.

Suggested Citation

  • Qun Bao & Rui Huang & Guoqin Pan & Laixun Zhao, 2025. "Inside Job, Chinese Style: Suspicious Use of Public Funds under Fiscal Pressure," Discussion Paper Series DP2025-23, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2025-23
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2025-23.pdf
    File Function: First version, 2025
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    Keywords

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    JEL classification:

    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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