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Intra‐provincial Revenue Sharing and the Subnational Government's Fiscal Capacity in China: The Case of Zhejiang Province
Author(s) -
Qian Tao,
Zhang Qi
Publication year - 2018
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12247
Subject(s) - revenue , revenue sharing , china , government (linguistics) , business , tax revenue , fiscal capacity , autonomy , fiscal union , transfer payment , government revenue , fiscal policy , economic policy , economics , finance , public economics , political science , monetary economics , market economy , welfare , linguistics , philosophy , law
This study investigates whether the tax‐sharing system has deteriorated the fiscal capacity of subnational governments by analyzing how fiscal revenues are divided between provincial and sub‐provincial governments. Our study of county‐level fiscal data from Zhejiang Province in China during 1994–2007 shows that intra‐provincial revenue‐sharing rules favor county governments in two ways: (i) they improve county governments ‘fiscal autonomy in terms of using their own revenues; and (ii) they enhance county governments ‘fiscal capacity through province‐to‐county general transfers. In addition, we find that intra‐provincial fiscal revenue‐sharing rules and transfers reduce fiscal disparity between counties.