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Does Fiscal Decentralization Increase the Investment Rate? Evidence from Chinese Dynamic Panel Data
| Content Provider | Semantic Scholar |
|---|---|
| Author | He, Qichun Sun, Meng Zou, Heng-Fu |
| Copyright Year | 2013 |
| Abstract | China has one of the highest investment rates in the world, and in 1994, China introduced a new fiscal system. The current study utilizes provincial panel data from the period of 1995-2010 to provide a consistent underlying fiscal regime. The estimation results show that expenditure decentralization has a significant, positive effect on the physical capital investment rate in both least squares dummy variables (LSDV) and system GMM (Generalized method of moments) estimations. In contrast, revenue decentralization has a negative effect on the investment rate. One possible explanation is that China's political centralization has been maintained during its economic decentralization. Since the provincial officials are not elected by local constituents but are rather appointed by the central government, it is rational for provincial officials to raise investment rates to meet the cadre promotion criteria of the central government, be it growth performance, as argued by Blanchard and Shleifer (2001) or revenue collection, identified by Shih et al. (2012). |
| Starting Page | 75 |
| Ending Page | 101 |
| Page Count | 27 |
| File Format | PDF HTM / HTML |
| Volume Number | 19 |
| Alternate Webpage(s) | http://aefweb.net/WorkingPapers/w592.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
