Fiscal Decentralization, Equalization, and Intra-Provincial Inequality in China -International Tax and Public Finance-
Regents Professor of Economics and Director of the International Center for Public Policy (ICePP), Jorge Martinez-Vazquez with Professor Yongzheng Liu and Alfred M. Wu published an article on the impacts of fiscal decentralization and fiscal equalization, both measured at the sub-provincial level, on intra-provincial inequality in China in the April 2017 issue of International Tax and Public Finance.
Liu, Yongzheng, Jorge Martinez-Vazquez, and Alfred M. Wu. 2017. “Fiscal Decentralization, Equalization, and Intra-Provincial Inequality in China.” International Tax and Public Finance 24, Issue 2, pp 248–281.
“Using a nationwide county-level panel dataset for the years 1995–2009, this paper conducts the first analysis in the literature to examine the impacts of fiscal decentralization and fiscal equalization, both measured at the sub-provincial level, on intra-provincial inequality in China. While fiscal decentralization offers significant advantages regarding public expenditure efficiency, a potentially large disadvantage is that it may lead to increased regional inequality. In this paper, in line with our theoretical hypotheses, we find that while fiscal decentralization at the sub-provincial level in China leads to larger intra-provincial inequality, fiscal equalization efforts performed by provincial governments tend to mitigate the detrimental effect of fiscal decentralization on intra-provincial inequality. Our results also indicate that the quantitative effects of fiscal decentralization on regional inequality tend to be larger when they are measured from the expenditure side, which is consistent with the fact that expenditure decentralization is a much more meaningful measure of decentralization in China. Overall, we provide evidence on the potential inequality costs of using fiscal decentralization as a development strategy. At the same time, we emphasize the importance of implementing a fiscal equalization program to ensure the overall success of decentralization policy.” – International Tax and Public Finance-
Martinez-Vazquez is a Regents Professor of Economics and Director of the International Center for Public Policy (ICePP) at the Andrew Young School of Policy Studies at Georgia State University. Yongzheng Liu, an affiliate of ICePP and an Andrew Young School (AYS) alumni, is currently an Associate Professor of Economics at the School of Finance, China Financial Policy Research Center at Renmin University of China in Beijing and collaborates frequently with Martinez-Vazquez. Wu is an Assistant Professor with the Department of Asian and Policy Studies (APS) of the Faculty of Liberal Arts and Social Sciences (FLASS) at The Education University of Hong Kong (EdUHK).
Regents Professor of Economics; Director ICePP (AYSPS)
Area of Expertise: Fiscal Decentralization, Tax Policy
Associate Professor of Economics School of Finance, China Financial Policy Research Center at Renmin University of China in Beijing
|Alfred M. Wu
Assistant Professor of Economics, The Education University of Hong Kong (EdUHK)