تمرکز زدایی مالی و تمرکز سیاسی در چین : پیامدهایی برای رشد و نابرابری

China's current fiscal system is largely decentralized while its governance structure is rather centralized with strong top-down mandates and a homogeneous governance structure. Due to large differences in initial economic structures and revenue bases, the implicit tax rate and fiscal burdens to support the functioning of local government vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on preexisting or new firms to finance public goods provision, thereby creating a healthy investment environment for the nonfarm sector to grow. In contrast, regions with agriculture as the major economic activity have little resources left for public investment after paying the expenses of bureaucracy. Consequently, differences in economic structures and fiscal burdens may translate into a widening regional gap. Journal of Comparative Economics34 (4) (2006) 713–726.

Transferring authority to lower levels of government, which have better knowledge of the local conditions and preferences and are under closer scrutiny by their constituencies, is expected to improve the provision of local public goods and services (Dethier, 1999 and Bardhan, 2002). Tiebout (1956) argues that under fiscal decentralization and interjurisdictional competition, citizens can vote with their feet to allocate themselves according to their preference to a package of local public goods and taxes. In other words, fiscal decentralization can prompt more efficient provisions of local public goods if individuals can freely move across localities. In addition to the sorting and matching role, Qian and Roland (1998, QR for short hereafter) emphasize that fiscal decentralization can also serve as a disciplinary device to preserve market incentives. These theories highlight the positive role of fiscal decentralization and interjurisdictional competition on the efficiency of public goods provision. In the past two decades, decentralization has become a global trend. However, empirical evaluation on the impact of decentralization on growth and distribution in developing countries is still in its infancy (Bardhan, 2002). China, like many developing countries, has undergone a process of fiscal decentralization.1 The sheer size of China provides a good ground to test the predictions of the theories in the context of development. Using provincial data up to 1993, Lin and Liu (2000) provide empirical evidence that decentralization is conductive to growth. Zhang and Zou (1998), however, have found a negative relationship between growth and decentralization. Jin et al. (2005) reach a more optimistic finding that decentralization is not only good for growth but also for equity based on data up to 1992. Using data at a more microlevel, a few other studies (West and Wong, 1995, Park et al., 1996 and Knight and Li, 1999) show that decentralization has a negative distributional effect. These studies are all based on data up to the early 1990s. Since then, more in-depth fiscal reforms have taken place and more comprehensive data have become publicly available. Therefore, it is important to extend the work to cover a longer period and more spatial units so as to reconcile the differences.

Considering the sheer size of China, fiscal decentralization is imperative for the government to tackle the information and incentive problems inherent in the relationship between the central and local governments. However, decentralization is a complex process involving not only fiscal aspects but also governance and mandates. When government sizes are largely independent of the demand of constituencies, the standard Tiebout sorting model is no longer applicable. Under the current local–central fiscal arrangement, the large regional variation in production patterns and revenue structures makes the underlying assumption of the QR fiscal federalism model invalid. Moreover, the transaction costs of tax collections become a more serious issue under fiscal decentralization. The high collection cost of agricultural tax plus the excessive government size makes local governments in regions endowed mostly with agricultural production barely able to provide the necessary public goods and services. Farmers and firms in poor regions are paying heavy taxes, while those in rich regions enjoy generous support and lower tax burdens. The regressive nature of the rural taxation system plays a significant role in explaining the divergent regional growth patterns even after controlling for the initial value. Overall, the fiscal decentralization is in favor of the rich localities and exacerbates the regional gap. In his famous article, Oates (1968) has argued that to ensure the functioning of fiscal federalism, the central government should carry over the functions of stabilization and distribution, while the local government should be mainly responsible for performing the allocation role, i.e., a more efficient provision of public goods and service. In the case of China, however, the local government has to perform both the functions of distribution and allocation. By nature, it is almost impossible for local governments to equalize the fiscal capacity across regions in such a diverse country.