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Need, Bargaining, or Efficiency Driven? Explaining Central-Local Fiscal Transfers in Post-Reform China

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Abstract:

An examination of China’s central-provincial fiscal transfers in the post-reform era shows a pattern of wild cross-regional variations: some provinces submitted huge amounts of revenue to the center; while other provinces received considerable central subsidies. Why did some provinces enjoy more fiscal power than others? The need-based and bargaining-based theories have provided different hypotheses to explain such cross-regional variations. But in this paper I argue that both theories fall short of telling the whole story about central-local fiscal transfers in China. An alternative explanation is that the Chinese central government tended to make larger fiscal transfers to localities that used their revenues more efficiently and achieved higher economic development level. In this way, fiscal transfer essentially functioned as an investment: By transferring more fiscal revenues to localities where they could be efficiently used to yield high returns, the center could harvest more fiscal revenue in the future.

Most Common Document Word Stems:

transfer (255), local (255), central (241), fiscal (202), revenu (98), tax (97), provinc (85), per (81), capita (73), govern (71), variabl (70), center (67), return (66), region (60), polit (56), econom (52), china (47), correl (46), receiv (43), year (41), use (39),

Author's Keywords:

China, central-local relations, fiscal transfer, need, political bargaining, efficiency, investment
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Name: American Political Science Association
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MLA Citation:

Zhan, J. Vivian. "Need, Bargaining, or Efficiency Driven? Explaining Central-Local Fiscal Transfers in Post-Reform China" Paper presented at the annual meeting of the American Political Science Association, Marriott, Loews Philadelphia, and the Pennsylvania Convention Center, Philadelphia, PA, Aug 31, 2006 <Not Available>. 2011-03-13 <http://www.allacademic.com/meta/p151250_index.html>

APA Citation:

Zhan, J. , 2006-08-31 "Need, Bargaining, or Efficiency Driven? Explaining Central-Local Fiscal Transfers in Post-Reform China" Paper presented at the annual meeting of the American Political Science Association, Marriott, Loews Philadelphia, and the Pennsylvania Convention Center, Philadelphia, PA Online <APPLICATION/PDF>. 2011-03-13 from http://www.allacademic.com/meta/p151250_index.html

Publication Type: Proceeding
Abstract: An examination of China’s central-provincial fiscal transfers in the post-reform era shows a pattern of wild cross-regional variations: some provinces submitted huge amounts of revenue to the center; while other provinces received considerable central subsidies. Why did some provinces enjoy more fiscal power than others? The need-based and bargaining-based theories have provided different hypotheses to explain such cross-regional variations. But in this paper I argue that both theories fall short of telling the whole story about central-local fiscal transfers in China. An alternative explanation is that the Chinese central government tended to make larger fiscal transfers to localities that used their revenues more efficiently and achieved higher economic development level. In this way, fiscal transfer essentially functioned as an investment: By transferring more fiscal revenues to localities where they could be efficiently used to yield high returns, the center could harvest more fiscal revenue in the future.

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Document Type: application/pdf
Page count: 24
Word count: 10958
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Need Bargaining or Efficiency Driven? Explaining Central-Local Fiscal Transfers in Post-Reform China Jing Vivian Zhan Department of Political Science University of California Los Angeles jzhan@ucla.edu Prepared for delivery at the 2006 Annual Meeting of the American Political Science Association August 30-September 3 2006. Copyright by the American Political Science Association. Abstract An examination of China’s central-provincial fiscal transfers in the post-reform era shows a pattern of wild cross-regional variations: some provinces submitted huge amounts of revenue to the center;
aim to explain the interregional variation in central-local fiscal transfers including the equality-driven argument and the bargaining-driven argument. However these arguments fall short of telling the whole story. My statistical analysis highlights an efficiency-driven logic of central-local transfers: the central government tended to make larger fiscal transfers to localities that used their revenues more efficiently and achieved higher economic development level. In this way fiscal transfers essentially functioned as investment: By transferring more fiscal revenues to where they could


Similar Titles:
Fiscal Crisis, Political Crisis?-- Financing Local Government in China

Changes in China?s Local Governments: Adaptive Political and Socio-Cultural Response to Sweeping Economic Reforms


 
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