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

Annals of Economics and Finance, 2012, vol. 13, issue 1, 53-90

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; Public finance; Budget; Corruption; Financial burden; China (search for similar items in EconPapers)
JEL-codes: D7 H1 H2 H4 H5 H6 H7 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Fiscal Decentralization and Peasants' Financial Burden in China (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2012:v:13:i:1:jinshenzou

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