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Deficit Estimation and Welfare Effects after the 1994 Fiscal Reform in China: Evidence from the County Level
Author(s) -
Zhang Pengfei,
Shih Victor
Publication year - 2008
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/j.1749-124x.2008.00112.x
Subject(s) - economics , redistribution (election) , china , decentralization , per capita , welfare , fiscal imbalance , transfer payment , tax reform , estimation , payment , fiscal policy , demographic economics , fiscal union , monetary economics , public economics , finance , political science , population , market economy , demography , management , sociology , politics , law
Using simple statistical analysis of county‐level budgetary data from across all of China's counties, the present paper examines whether the post‐1994 fiscal decentralization has affected redistribution at the county‐level. The new fiscal system has been less able to narrow inter‐county dispersion in fiscal imbalances than the old one, even after taking intergovernmental transfer payments into account. Although with the post‐1994 system there has been a modest increase in per capita welfare spending in all counties on average, much of the new‐found fiscal resources have been spent on salary and administrative expenses rather than spending on public goods. Therefore, it is imperative that the reform of China's tax system is intensified.