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Title:Fiscal decentralization and political centralization in China: Implications for growth and inequality PDF Logo
Authors:Zhang, Xiaobo
Issue Date:2006
Series/Report no.:Research Paper, UNU-WIDER, United Nations University (UNU) 2006/93
Abstract:China’s current fiscal system is largely decentralized while its governance structure is rather centralized with strong top-down mandates and a homogenous governance structure. Due to large differences in initial economic structures and revenue bases, the implicit tax rate and fiscal burdens to support the functioning of local government vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on preexisting or new firms to finance public goods provision, thereby creating a healthy investment environment for the nonfarm sector to grow. In contrast, regions with agriculture as the major economic activity have little resources left for public investment after paying the expenses of bureaucracy. Consequently, differences in economic structures and fiscal burdens may translate into a widening regional gap.
Subjects:Chinese economy
fiscal decentralization
regional inequality
Document Type:Working Paper
Appears in Collections:WIDER Research Papers, United Nations University (UNU)

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