Regional Competition, Fiscal Federalism, and Economic Structure: Evidence from China

Abstract

Fiscal decentralization is an important element that fostered the success of China’s reforms towards a market economy. If economics is all about incentives, then understanding how fiscal reforms provided incentives for local authorities and economic entities to stimulate economic growth is essential to understanding China’s economic success. There is no dispute about the positive impacts of fiscal reforms on China’s recent economic growth. However, there are many concerns about the negative impacts of fiscal decentralization, such as corruption and the imbalance of regional development. Among these negative effects, local protectionism seems to be one of the most prominent problems associated with fiscal decentralization and has been widely commented on and studied. General consensus recognizes the seriousness of local protectionism in China and its damaging effect on economic efficiency, but tends to neglect the dynamics of the relationship between local protectionism and market forces.KeywordsLocal GovernmentCapital MobilityState ShareFiscal DecentralizationLocal ProtectionismThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.