تمرکز زدایی منطقه ای و مشوق های مالی : فدرالیسم، سبک چینی

Aligning the interests of local governments with market development is an important issue for developing and transition economies. Using a panel data set from China, we investigate the relationship between provincial government's fiscal incentives and provincial market development. We report three empirical findings. First, we find that during the period of “fiscal contracting system” the discrepancy between ex ante contracts and ex post implementation was relatively small, suggesting that the fiscal contracts were credible. Second, we find a much higher correlation, about four times, between the provincial government's budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s, demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform. Third, we find that stronger ex ante fiscal incentives, measured by the contractual marginal retention rate of the provincial government in its budgetary revenue, are associated with faster development of the non-state sector as well as more reforms in the state sector in the provincial economy. This holds even when we control for the conventional measure of fiscal decentralization. Finally, we compare federalism, Chinese style, to federalism, Russian style.

Reforming the government is a crucial component of both the transition from a planned to a market economy and economic development. Creating thriving markets in these economies typically requires transforming a highly centralized and interventionist government into one that supports the market and fosters decentralized economic activities. Democracy, separation of powers, and the rule of law are among the important institutions that allow citizens to hold the government accountable for its economic actions and to secure markets from arbitrary state intrusion. By devolving power from the central to local levels, federalism is another institution that helps implement a limited yet effective government conducive to market development. Economic theories of federalism have traditionally emphasized allocative benefits of decentralization in the provision of public goods and services, such as education and health care. There are two related ideas. First, Hayek, (1945) discussed the use of knowledge in society, emphasizing that local governments have better access to local information, which allows them to provide public goods and services that better match local preferences than the national government. Second, Tiebout (1956) introduced the inter-jurisdictional competition dimension and argued that such a competition provides a sorting mechanism to better match public goods and services with consumers' preferences. Drawing on these ideas, Musgrave (1959) and Oates et al. (1972) built a theory of fiscal federalism, stressing among other things the appropriate assignment of taxes and expenditures to the various levels of government to improve welfare.

This paper studies the changing local government fiscal incentives and their impacts on market development. Many anecdotes suggest the importance of fiscal incentives in the previous studies on China's reforms. The econometric results in this paper provide some systematic evidence on the economic significance of fiscal incentives. We find that the reforms considerably strengthened the fiscal incentives of provincial governments, and they are generally conducive to provincial economic development and reform. These results point to the important link between local government's fiscal incentives and local economic development. Comparisons of local government's behavior toward local economic development between China and Russia are striking. Our study of federalism, Chinese style, and the other studies on federalism, Russian style (Zhuravskaya, 2000 and de Figueiredo and Weingast, 2001), indicate that one crucial difference concerns the fiscal incentives provided for local governments to pursue market-supporting activities. Our perspective yields an important insight about how federalism works in promoting economic development; namely, there exists a positive relationship between the strength of fiscal incentives faced by lower-level governments and local economic performance. Countries with strong fiscal incentives for local governments are expected to experience healthier local business development while those with low fiscal incentives are expected to experience the opposite. Instead of decentralization per se, we emphasize the importance of strong fiscal incentives. Whether this prediction holds empirically in other countries awaits further work.