Fiscal incentives and policy choices of local governments: Evidence from China

• 成果类型: Article
• 署名作者: Han, Li; Kung, James Kai-Sing
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2015.04.003
• 发表日期: 2015
• 页码: 89-104
• 关键词: Fiscal federalism; fiscal incentives; Revenue sharing; Local governments; Land conveyance; urbanization; Simulated instrumental variable

摘要

This paper examines how fiscal incentives affect the policy choices of local governments in the context of China. Based on exogenous changes in the intergovernmental revenue-sharing scheme, we construct a simulated instrumental variable to resolve the endogeneity problem. We find evidence that local governments shifted their efforts from fostering industrial growth to urbanizing China, i.e., to developing the real estate and construction sectors, when their retention rate of enterprise tax revenue was reduced. The increase from the new revenue source compensated for half of the losses in revenue that resulted from the reassignment of fiscal rights. The reassignment had also the effect of retarding the industrial growth of domestically-owned firms in particular. (C) 2015 Elsevier B.V. All rights reserved.