Impact of Fiscal Re-Centralization on China’s Regional Economies: Evidence from A Multi-Regional Model
نویسندگان
چکیده
This paper presents a multiregional econometric model of China. The pioneering large-sized model consists of seven blocks with over 1,200 equations. It covers 30 provinces of China for the period from 1985 to 1998. Panel data technique is adopted to estimate behaviour equations. A counterfactual simulation is conducted to assess the impact of fiscal recentralization on China’s regional economies in the 1990s. The result shows that when the central government chose fiscal recentralization, the local governments responded by choosing to shift from providing a helping hand to a grabbing hand. The central government achieves higher revenue for itself, but with huge costs in terms of forgone investment and economic growth.
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