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Fiscal decentralization, public spending, and economic growth in China

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  • Tao Zhang
  • Heng-fu Zou

Abstract

The authors of this report use data on China to demonstrate how the allocation of fiscal revenue and expenditures between central and local governments has affected economic growth since reforms that began in the late 1970s. They find a higher degree of fiscal decentralization associated with lower provincial economic growth over the past 15 years in China. This implies that fiscal reforms begun in China in the early 1980s have probably failed to promote the country's economic growth. This result is consistently significant and robust in their empirical examinations, and is surprising in light of the argument that fiscal decentralization usually contributes positively to provincial or local economic growth.

Suggested Citation

  • Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1608
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Public&Municipal Finance; Public Sector Economics&Finance; Urban Economics; Economic Theory&Research; Banks&Banking Reform; Urban Economics; Economic Theory&Research; Public Sector Economics&Finance; National Governance; Public&Municipal Finance;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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