تمرکززدایی همراه با غلبه سیاسی: کنترل عمودی، پاسخگویی محلی و نابرابری های منطقه ای در چین

Motivated by China's experience in the reform era, we study the fiscal relations between central and local governments embedded in a vertical control system with local officials appointed by the central government. The probability of their re-appointment depends, in part, on how well they perform in fulfilling their mandates from above. Self-interested local bureaucrats decide on the amount of predatory charges to be collected and the amount of public goods provided to increase their chances of survival, while at the same time maximizing the expected surplus accruing to their private agendas. Within the framework of this model, we explore how such issues as fiscal decentralization, local accountability and regional disparities interact with the stringency of the vertical control system. The paper also contributes to the discussion of the divergent experience of China and Russia.

The purpose of this paper is twofold. First, motivated by China's fiscal decentralization experience since the 1980s, we introduce a model that explores the impact of decentralizing taxing powers to subnational governments embedded in a vertical bureaucratic control system. With superior governments meting out rewards and punishments to local governments in accordance with the fulfillment of the mandates from above, the model explores the problem of local accountability by analysing the responses of local bureaucrats within such an institutional set-up. Second, the issues discussed in our model overlap with those in the recent literature on the interpretation of the Chinese as opposed to the Russian fiscal decentralization experience; see, e.g., Berkowitz and Li (2000), Zhuravskaya (2000). Our model belongs to a genre of economic research taking politics seriously, a sample of which may be found in Persson and Tabellini (2000). Central to this line of intellectual pursuit is the postulate of self-interested politicians/bureaucrats and how they navigate in response to incentives engendered by different political landscapes, be they legislative bargaining or electoral politics. Gaining currency in this new literature is the study of decentralized political governance, chiming in with the worldwide trend towards fiscal decentralization and local participation (World Bank, 2000, chapter 5).1 Fiscal decentralization, through the devolution of powers to local governments, has often been hailed as a reform that brings governments closer to the people. Frequently and implicitly assumed in the new generation of models on decentralization are forms of democratic institutions that induce politicians to implement the wishes of local residents, thereby ensuring local accountability. However, some critics have pointed out that emerging economies devolving powers to local governments often lack these institutions and question whether there exists alternative institutional safeguards that handcuff the grabbing hands of local Leviathans.2 Particularly striking is the Russian experience that is a reminder of what can go awry when fiscal decentralization is pushed forward without the support of those political institutions that align the incentives of local politicians and bureaucrats with a market-enhancing and pro-growth direction; see Shleifer (1997), Shleifer and Treisman (2000), Blanchard and Shleifer (2001).

Beyond the world of democratic institutions, the rule of law and competition in the North is a Pandora's box of institutional arrangements shaping the central-local relations in the South. Amid the worldwide trend to bring governments closer to the people, one question immediately comes to mind is whether the idiosyncratic amalgamations of institutions peculiar to many developing nations (or what Shah (1997) refers to as the “enabling environment”) can hold local bureaucrats and politicians accountable. Scrutinizing the comparative experiences of fiscal decentralization cannot but be a valuable exercise in distilling lessons from real-world decentralization (e.g., Bardhan and Mookherjee (2006)) and furnishes food for thought when one is crafting models on the effects of fiscal decentralization. Adding to this repertoire of comparative analyses is our analytic narrative of China's fiscal decentralization. In theory, there may exist different disciplining devices that hold local governments accountable. In the real world, those options, be they exit, voice or regulatory oversight from above, may only be effective in varying degrees. In the case of Russia, Shleifer and Treisman (2000) contend that emaciation of central authority is the culprit behind Russia's saga, while Blanchard and Shleifer (2001) seem to suggest that a modicum of central control is a precondition for China's success story. Supporting their view is our model that is a more nuanced interpretation of China's experience compared with such reigning paradigm as market preserving system.19 The latter attributes the exit option (i.e., interjurisdictional competition and factor mobility) as the disciplining device that curbs local predation. The exit option, at least up to now, may not be adequate in holding local governments accountable (Tsui & Wang, 2004).