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

Qun Bao, Rui Huang, Guoqin Pan and Laixun Zhao
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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

No DP2025-23, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

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.

Keywords: Fiscal pressure; Government audit; Public funds; China (search for similar items in EconPapers)
JEL-codes: H83 O23 P37 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2025-08
New Economics Papers: this item is included in nep-cna and nep-pbe
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