Deficit Estimation and Welfare Effects after the 1994 Fiscal Reform in China: Evidence from the County Level

18 Pages Posted: 28 May 2008

See all articles by Pengfei Richar Zhang

Pengfei Richar Zhang

Peking University - China Center for Economic Research (CCER)

Victor Shih

University of California, San Diego (UCSD), School of Global Policy & Strategy, 21st Century China Center

Abstract

Using simple statistical analysis of county-level budgetary data from across all of China's counties, the present paper examines whether the post-1994 fiscal decentralization has affected redistribution at the county-level. The new fiscal system has been less able to narrow inter-county dispersion in fiscal imbalances than the old one, even after taking intergovernmental transfer payments into account. Although with the post-1994 system there has been a modest increase in per capita welfare spending in all counties on average, much of the new-found fiscal resources have been spent on salary and administrative expenses rather than spending on public goods. Therefore, it is imperative that the reform of China's tax system is intensified.

Keywords: fiscal centralization, fiscal expense, tax reform

JEL Classification: H50, H71, P35

Suggested Citation

Zhang, Pengfei Richar and Shih, Victor, Deficit Estimation and Welfare Effects after the 1994 Fiscal Reform in China: Evidence from the County Level. China & World Economy, Vol. 16, No. 3, pp. 22-39, May-June 2008, Available at SSRN: https://ssrn.com/abstract=1138047 or http://dx.doi.org/10.1111/j.1749-124X.2008.00112.x

Pengfei Richar Zhang (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China

Victor Shih

University of California, San Diego (UCSD), School of Global Policy & Strategy, 21st Century China Center ( email )

9500 Gilman Drive #0519
La Jolla, CA 92093-0519
United States

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