Zheng Li and ICePP director Jorge Martinez-Vazquez have released a working paper called “Fiscal Decentralization and Interregional Capital Misallocation: Evidence from China.” Misallocation of factors of production has been recently viewed as a promising explanation accounting for the large difference in total factor productivity (TFP) across countries. This paper differs from previous studies by concentrating on interregional capital misallocation and by focusing on the role of fiscal decentralization in shaping misallocation. The results based on provincial-level panel data suggest that fiscal decentralization can lower inter-municipal capital misallocation while revenue decentralization performs better than expenditure decentralization.
Read the full working paper here.
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The International Center for Public Policy has published a working paper series since 1997 to disseminate academic research quickly and to stimulate discussion that can expand knowledge, instill optimal practice and build capacity in the public sector around the world to improve human well-being.
Our primary areas of interest are fiscal decentralization and local governance, tax policy, and public budgeting and fiscal management in the global context. Some papers may focus on the United States if the results have international relevance.
All views expressed in this working paper series are those of the respective authors and do not necessarily represent the views of the International Center for Public Policy, the Andrew Young School of Policy Studies or Georgia State University. All papers should be cited properly with reference to the author(s), institution and working paper series. Find all of our working papers here.