Political incentives and local government spending multiplier: Evidence for Chinese provinces (1978–2016)

Wen Zhang

Economic Modelling, 2020, vol. 87, issue C, 59-71

Abstract: This paper uses data from Chinese provinces to examine the effects of political incentives of provincial leaders on local government spending multipliers over the post-economic-reform period. The estimation based on the local projection method provides three novel findings. Firstly, the estimated cumulative relative government spending multiplier is well above unity, and it is greater in the period after 1994 compared with before 1994. Secondly, the political incentives of provincial leaders augment the local government spending multipliers, and the effects are highly significant after 1994. Thirdly, the economic boom strengthens the augmenting effects of political incentives after 1994.

Keywords: Fiscal multiplier; Political incentive; Chinese economy; Business cycle (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 P26 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:87:y:2020:i:c:p:59-71

DOI: 10.1016/j.econmod.2019.07.006

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