Fiscal decentralization, equalization, and intra-provincial inequality in China
Yongzheng Liu (),
Jorge Martinez-Vazquez () and
International Tax and Public Finance, 2017, vol. 24, issue 2, 248-281
Abstract Using a nationwide county-level panel dataset for the years 1995–2009, this paper conducts the first analysis in the literature to examine the impacts of fiscal decentralization and fiscal equalization, both measured at the sub-provincial level, on intra-provincial inequality in China. While fiscal decentralization offers significant advantages regarding public expenditure efficiency, a potentially large disadvantage is that it may lead to increased regional inequality. In this paper, in line with our theoretical hypotheses, we find that while fiscal decentralization at the sub-provincial level in China leads to larger intra-provincial inequality, fiscal equalization efforts performed by provincial governments tend to mitigate the detrimental effect of fiscal decentralization on intra-provincial inequality. Our results also indicate that the quantitative effects of fiscal decentralization on regional inequality tend to be larger when they are measured from the expenditure side, which is consistent with the fact that expenditure decentralization is a much more meaningful measure of decentralization in China. Overall, we provide evidence on the potential inequality costs of using fiscal decentralization as a development strategy. At the same time, we emphasize the importance of implementing a fiscal equalization program to ensure the overall success of decentralization policy.
Keywords: Fiscal decentralization; Equalization; Intra-provincial Inequality; China; H11; H77; R11; R12 (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)
http://link.springer.com/10.1007/s10797-016-9416-1 Abstract (text/html)
Access to full text is restricted to subscribers.
Working Paper: Fiscal Decentralization, Equalization, and Intra-Provincial Inequality in China (2014)
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:kap:itaxpf:v:24:y:2017:i:2:d:10.1007_s10797-016-9416-1
Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2
Access Statistics for this article
International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf
More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().