Impact of fiscal transfer on fiscal effort of Chinese provincial governments

Henglong Zhang () and Hao Wu ()
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Henglong Zhang: China Research Center for Government Efficiency, Shanghai University, Shanghai 200444, China
Hao Wu: School of International Business and Management, Shanghai University, Shanghai University, Shanghai 200444, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2009, vol. 4, issue 3, 406-424

Abstract: An ideal scheme of intergovernmental transfer should be determined by equalization and efficiency with taking account of fiscal effort of local governments. In this regard, this paper provides a comprehensive review of Chinese transfer system since the decentralized taxation system (DTS) starting from 1994. To begin with, we make numerical analysis on equalization in economic and fiscal aspects since the 1994 DTS reform. A Panel Data model is then developed to analyze correlations between each of three types of transfer and fiscal effort of provincial governments based on Chinese experience during 1994–2006. The authors further research respective situation of eastern, middle and western parts of China and finally draw a conclusion through the above analysis that the current fiscal transfer system does not tangibly contribute towards improving fiscal effort devoted by local governments. In addition to that, it even has a somewhat counter-equalizing effect.

Keywords: fiscal; transfer£¬fiscal; effort£¬equalization (search for similar items in EconPapers)
JEL-codes: H77 O53 P35 (search for similar items in EconPapers)
Date: 2009
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