Fiscal Decentralization and Peasants' Financial Burden in China

Jing Jin, Ashley Chunli Shen () and Heng-Fu Zou ()
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Jing Jin: Central University of Finance and Economics

No 490, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: This paper sheds light on the heavy financial burden on peasants in China's fiscal decentralization system. Using a political economy framework, this paper explores the tax-farming nature of China's fiscally decentralized system and examines why the system incurs a particularly heavy financial burden on peasants. Specifically, it points out that a political hierarchy financed by a tax-farming system in China, fails to contain the exploitative behavior of local officials, which results in the expenditure devolution and revenue centralization within the hierarchy. Ultimately, peasants bear the brunt of the tax burden. As the financial pressure of excessive levies and fees reaches a perilous point, peasants are resorting to violent protests. Unless a fiscally decentralized system with horizontal accountability mechanisms evolves, the country's ability to sustain a centralized polity may become increasingly undermined. A case study of township finance is used to exemplify the exploitative nature of China's fiscal decentralization system.

Keywords: Fiscal Decentralization; Corruption; Financial Burden; China (search for similar items in EconPapers)
JEL-codes: H1 H2 H5 H7 P10 R5 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2011
New Economics Papers: this item is included in nep-dev, nep-pbe, nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Annals of Economics and Finance, May 2012, pages 59-95

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Journal Article: Fiscal Decentralization and Peasants' Financial Burden in China (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:490

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