How do fiscally created one-city monopolies cause intra-provincial inequality in China?

Jian Chen, Di Zhao, Bin He and Savo Stanojevic

Land Use Policy, 2022, vol. 120, issue C

Abstract: Cities in a monopolistic position or possessing certain advantages within provinces induce the dilemma of aggregate economic growth and intra-provincial inequality in China, which remains controversial and unclear. Given the role of provincial capital administrative power in the formation of monocentricity, we propose and demonstrate how fiscally created one-city monopolies (FOCM) cause intra-provincial inequality. The empirical results, through measuring relative fiscal interventions between the provincial capital and the second-largest city in a province during the period 1990–2020, show that fiscally created one-city monopolies increase intra-provincial inequality. As part of a robustness check, we find an intensified impact of fiscally created one-city monopolies on the central and western regions. Endogeneity tests provide consistent evidence. We also point out that the adverse impact of fiscally created one-city monopolies on intra-provincial inequality primarily originates from local capital accumulation and industrial agglomeration. By contrast, industrial upgrading, urbanization, improvement of transportation, and opening-up help reduce this adverse impact.

Keywords: Fiscally created one-city monopolies; Intra-provincial inequality; Government intervention (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:lauspo:v:120:y:2022:i:c:s0264837722002551

DOI: 10.1016/j.landusepol.2022.106228

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