Fiscal Decentralization, Equalization, and Intra-Provincial Inequality in China

Yongzheng Liu, Jorge Martinez-Vazquez () and Alfred Wu

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: Using a nationwide county-level panel dataset for the years 1995-2009, this paper conducts the rst analysis in the literature to examine the impacts of scal decentralization and scal equalization, both measured at the sub-provincial level, on intra-provincial inequality in China. While scal decentralization o ers signi cant advantages regarding public expenditure eciency, a potentially large disadvantage is that it may lead to increased regional inequality. In this paper, in line with our theoretical hypotheses, we nd that while scal centralization at the sub-provincial level in China leads to larger intra-provincial inequality, scal equalization e orts performed by provincial governments tend to mitigate the detrimental e ect of scal decentralization on intraprovincial inequality. Our results also indicate that the quantitative e ects of scal decentralization on regional inequality tend to be larger when they are measured from the expenditure side, which is consistent with the fact that expenditure decentralization is a much more meaningful measure of decentralization in China. Overall, we provide evidence on the potential inequality costs of using scal decentralization as a development strategy. At the same time, we emphasize the importance of implementing a scal equalization program to ensure the overall success of decentralization policy.

Keywords: Fiscal decentralization; equalization, intra-provincial inequality; China (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-11-18
New Economics Papers: this item is included in nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://icepp.gsu.edu/files/2015/03/ispwp1432.pdf (application/pdf)

Related works:
Journal Article: Fiscal decentralization, equalization, and intra-provincial inequality in China (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper1432

Access Statistics for this paper

More papers in International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University Contact information at EDIRC.
Bibliographic data for series maintained by Paul Benson ().