Infrastructure investment in China: A model of local government choice under land financing
Shen Guo () and
Journal of Asian Economics, 2018, vol. 56, issue C, 24-35
What factors contribute to high – even excessive – investment in public infrastructure? One explanation identified in the literature is fiscal decentralization and resulting competition for mobile capital among localities. We elaborate on this explanation for the Chinese context by developing a model of local public infrastructure investment with land financing. We show that public infrastructure investment increases when local governments are able to capture returns from investment in land improvement. We further find that the “polarization effect” associated with fiscal decentralization by Cai and Treisman (2005) can be exacerbated when local governments are able to capture the returns from land improvement. Finally, we note that while land financing can provide a stimulus for local development, this may come at the expense of a diminished share of spending on social welfare programs and other public consumption goods.
Keywords: Fiscal competition; Land financing; Composition of government expenditure (search for similar items in EconPapers)
JEL-codes: H4 H7 R5 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:56:y:2018:i:c:p:24-35
Access Statistics for this article
Journal of Asian Economics is currently edited by C. Wiemer
More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().