Journal
JOURNAL OF DEVELOPMENT ECONOMICS
Volume 86, Issue 1, Pages 112-128Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jdeveco.2007.05.002
Keywords
economic growth; regional equity; fiscal decentralization; China
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This paper investigates the potential tradeoff between economic growth and regional equity in the design of fiscal decentralization policy in the context of China's experience. We develop a theoretical model of fiscal decentralization, where overall national economic growth and equity in the regional distribution of fiscal resources are the two objectives pursued by the central government. The model is tested using panel data for 1985-98. We find that fiscal decentralization in China has led to economic growth as well as to significant increases in regional inequality. (C) 2007 Elsevier B.V. All rights reserved.
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