Vertical Imbalance and Local Fiscal Discipline in China

2008 ◽  
Vol 8 (1) ◽  
pp. 61-88 ◽  
Author(s):  
Gang Guo
Keyword(s):  
Local Governments ◽  
Panel Data Analysis ◽  
Political Stability ◽  
Dynamic Panel Data ◽  
Transfer Payment ◽  
System Reform ◽  
Fiscal Discipline ◽  
Dynamic Panel ◽  
Transfer Scheme ◽  
Fiscal Behavior

This article examines local fiscal behavior in contemporary China against the backdrop of decentralized spending responsibilities and recentralized revenues. Vertical imbalance after the 1994 tax-sharing system reform, coupled with other features of the fiscal institutions, is not conducive to conservative local fiscal behavior. Moreover, a main driving force behind the expansion of local governments is the politically motivated intergovernmental transfer scheme. The center in effect “buys” political stability in sensitive areas while holding local leaders accountable for their tax efforts. A dynamic panel analysis of Chinese counties reveals that a million-yuan increase in general transfer payment and salary raise subsidies would add, respectively, fifteen and sixteen employees to the county government payroll, other things being equal. At the same time, increased subsidies from upper-level governments do not “crowd out” or significantly affect local tax effort. Additional dynamic panel data analysis at the provincial level produced similar findings.

scholarly journals State and Local Fiscal Behavior and Federal Grant Policy

1973 ◽  
Vol 1973 (1) ◽  
pp. 15 ◽  
Author(s):  
Edward M. Gramlich ◽  
Harvey Galper ◽  
Stephen Goldfeld ◽  
Martin McGuire
Keyword(s):  
Federal Grant ◽  
Fiscal Behavior ◽  
State And Local

Does Local Autonomy Breed Leviathans? An Empirical Examination of All Cities in the United States

2021 ◽  
pp. 106591292110498
Author(s):  
Mikhail Ivonchyk
Keyword(s):  
United States ◽  
The United States ◽  
City Size ◽  
Empirical Examination ◽  
Institutional Collective Action ◽  
Theoretical Predictions ◽  
Action Model ◽  
Quantile Regression Analysis ◽  
Fiscal Behavior ◽  
Different Levels

US states grant their local units different levels of autonomy in several dimensions including fiscal, functional, structural, and legal discretion. This study uses a comprehensive, multidimensional measure of autonomy to test its association with the fiscal behavior of over 19,000 municipalities in the United States. Competing theoretical predictions range from significant increases in government size (Leviathan model), to no effect (median-voter model), and even smaller governments (institutional collective action model). Quantile regression analysis is implemented to test the association between autonomy and fiscal behavior for different city sizes. The empirical findings indicate that cities with more autonomy tend to spend less and have lower taxes and debt. The strength of this relationship, however, varies by city size.

scholarly journals Fiscal deficits and executive planning horizons

2019 ◽  
Vol 8 (2) ◽  
pp. 329-343 ◽  
Author(s):  
Mike Seiferling
Keyword(s):  
Empirical Evidence ◽  
Executive Control ◽  
Representative Sample ◽  
Election Campaigns ◽  
Fiscal Deficits ◽  
Term Limit ◽  
The Future ◽  
Fiscal Behavior ◽  
Planning Horizons

AbstractExecutive control of government is generally not a long-term job. In such cases, relatively short executive tenure should be expected to play an important role in determining the degree to which policymakers internalize the future costs associated with their current fiscal behavior. The effects of policymaker's expected planning horizons on macroeconomic outcomes, however, have been difficult to model outside of a fixed term limit context due to the unobserved likelihood of remaining in office, along with potential endogeneity problems where re-election campaigns can be enhanced with generous, deficit-financed expenditures in election years. From a globally representative sample of 79 countries over a 32-year period (1980–2012), this paper provides empirical evidence suggesting that incumbent governments who know that will not be in office in the following period with a probability of one, are found to generate significantly higher deficits in a linear discounting model, and are found to produce the least responsible fiscal outcomes where the likelihood of re-election is around fifty percent in quadratic discounting models.

scholarly journals Fiscal Behavior Volatility, Economic Growth, and Urban-Rural Income Disparity

2014 ◽  
Vol 2 (3) ◽  
pp. 217-225
Author(s):  
Yufeng Wang ◽  
Shulin Liu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Local Governments ◽  
Economic Transition ◽  
Income Disparity ◽  
Dynamic Panel Model ◽  
Rural Income ◽  
Panel Model ◽  
Urban Rural ◽  
Fiscal Behavior

AbstractFiscal behavior of local governments has great volatility in China, especially in the period of economic transition. This paper estimates fiscal behavior volatility by making regression analysis of panel data of 30 provinces from 1994 to 2011. Then we establish a dynamic panel model to study the direct and indirect impact of the fiscal behavior volatility on the urban-rural income disparity. Empirical results show that urban-rural income disparity has nonlinear relationship with economic growth and financial development and that fiscal behavior volatility expands the urban-rural income disparity directly and indirectly. The larger fiscal behavior volatility comes greater urban-rural income disparity. We also find that the urban-rural income disparity is further enlarged through dual economic structure. If one of the economic growth and financial development is fixed, the other one has an inverted U-shaped relationship with urban-rural income disparity.

Lässt sich ein Abbau der öffentlichen Verschuldung politökonomisch erklären?

2002 ◽  
Vol 51 (2) ◽  
Author(s):  
Thomas Döring
Keyword(s):  
Public Choice ◽  
Public Debt ◽  
Special Focus ◽  
Fiscal Illusion ◽  
Industrial Countries ◽  
Fiscal Constraints ◽  
Political Ideologies ◽  
Fiscal Behavior ◽  
Public Choice Perspective ◽  
Budget Consolidation

AbstractPublic debt is one of the controversial and therefore most exciting subjects in the field of public finance. Since the 1970s many industrial countries constantly accumulated public dept, and this development was explained mainly from a public choice perspective. In the meantime the trend has reversed. Therefore the paper pursues the question whether this change in the borrowing behavior of government can also be explained from a public choice view. For this purpose and with special focus on Germany, first, the fading away of fiscal illusion is considered, induced by the learning processes which the citizens have undergone in the meantime. In addition, changes in political ideologies and institutions are analyzed as well as the fiscal constraints which result from a permanent high governmental debt. It is argued that the sum of these factors is responsible for the fact that politicians do not pursue their previous fiscal behavior any longer and instead revert to a strategy of budget consolidation.

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