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Determinants of Chinese Government Size: An Extreme Bounds Analysis

Philip Gunby and Yinghua Jin

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: This paper studies the factors associated with the size of the public sector as measured by government spending at the level of Chinese provinces using the method of extreme bounds analysis to identify robust correlates with public sector size. We find that almost all traditional “economic” and “social stability” factors are insignificant and not robust to model specification changes. In contrast, “political” factors such as the degree of fiscal decentralization and national transfers to provincial governments tend to be significant and robust. Our findings suggest that repeated government attempts to reduce the relative size of the Chinese government sector have failed because the political factors determining government spending haven’t changed.

Keywords: Government Size; Fiscal Decentralization; Wagner’s Law; Extreme Bounds Analysis (search for similar items in EconPapers)
JEL-codes: C52 H70 P20 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2016-11-04
New Economics Papers: this item is included in nep-mac, nep-pol and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:16/25

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