The Local Benefit-Transfers Issue in China: Based on Game Analysis Between Central and Local Governments

Conference Papers for Chinese Economic Association (UK/Europe), Oxford University, July 2010

16 Pages Posted: 8 Feb 2011 Last revised: 21 Jun 2011

Jianyang Hu

Harvard University; Cambridge University

Date Written: July 15, 2010

Abstract

In the process of China's reform, an underlying reason that arouses economic and political challenges is the local benefit-transfers issue. This paper frames the game between central and local governments of China to provide insightful policies for addressing the issue under the current political-economic mechanism. Empirical study on provincial panel data between 1995 and 2005 is then conducted to verify propositions of the general model and effects of parameters. Supporting evidence is found that (1) fiscal incentives promote social welfare while benefit-transfers impair it; (2) governmental competition aggravates the benefit-transfers issue while fiscal incentives alleviate it.

Keywords: Chinese Political Reform, Federalism, Corruption, Media Control, Government Competition

JEL Classification: P16, Q28, C70, D72, C23

Suggested Citation

Hu, Jianyang, The Local Benefit-Transfers Issue in China: Based on Game Analysis Between Central and Local Governments (July 15, 2010). Conference Papers for Chinese Economic Association (UK/Europe), Oxford University, July 2010 . Available at SSRN: https://ssrn.com/abstract=1755579

Jianyang Hu (Contact Author)

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

Cambridge University ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

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