Estimating local fiscal multipliers using political connections

Li, Rong; Zhou, Yunyun

doi:10.1016/j.chieco.2021.101599

Cited by 11 publications

(5 citation statements)

References 23 publications

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“…10 According to Guren et al (2020), β reflects the partial equilibrium effect and the local general equilibrium effect rather than the national general equilibrium effect, which is absorbed by the constant or the time fixed effect in regressions. β will be close to the national general equilibrium effect of government spending, provide the spillover effect of provincial government spending is similar to that of city-level government spending, which has been shown to be trivial in Li and Zhou (2021).…”

Section: Methodsmentioning

confidence: 90%

Does Fiscal Spending Affect TFP? Evidence from Chinese Provinces

HE,

Li,

2023

Preprint

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This paper utilizes the Bartik instrument to examine the impact of provincial government spending on TFP growth in China. Our analysis reveals a noteworthy relationship: a 1% increase in provincial government spending variable over 2-year horizon would on average lead to a 0.85% increase in TFP growth during 2001–2009 and a 0.25% decrease during 2010–2018. This disparity can be attributed to the varying effects of fiscal spending on above-scale industrial enterprises, which are influenced by change in access to production factors and market power. JEL codes: H7, E6, O4, L1

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Section: Methodsmentioning

confidence: 90%

Does Fiscal Spending Affect TFP? Evidence from Chinese Provinces

HE,

Li,

2023

Preprint

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“…This exploration is vital for comprehending how these financial mechanisms function across the administrative hierarchy. For instance, R. Li and Zhou (2021) emphasize the importance of understanding the effects of government spending in China, highlighting the use of political connections between central and local governments to identify the impacts of fiscal transfers. Similarly, F. Fan, Li, Tao, and Yang (2020) demonstrate the need to assess the implications of transfer-based decentralization on economic growth and spatial inequality.…”

Section: Conclusion and Discussionmentioning

confidence: 99%

Thrive or Throttle: The Impact of Government Transfers on Economic Growth in China

Chen

2024

Preprint

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As a pillar of the fiscal system, fiscal transfers are highly related to the healthy development of society and the economy. But do intergovernmental fiscal transfers promote local economies? Existing literature presents quite controversial results. To obtain confirmative conclusions, this study adopted meta-analysis and meta-regression analysis by evaluating 675 effect sizes from 51 academic studies. The results show transfer payments in China generally promote local economic growth. The effect on county-level governments is stronger than on provincial and municipal governments. Compared with special transfers, general transfers have a greater effect on the economy. Importantly, the driving effect of transfer payments has endogenous and lagged effects. This study’s in-depth analysis of the transfer-growth mechanism, accurate estimation of their correlation, and investigation into the research conclusion differences holds important reference value for improving China's fiscal transfer system. JEL Classification: H77 , H50 , O23

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“…In 1994, the Chinese government conducted a reform of the fiscal revenue-sharing system that aimed at increasing the fiscal revenue share of the central government. After the reform, the largest two parts of the tax, namely, the value-add tax (VAT) and corporate income tax (CIT), were shared between the local and central governments [8]. The fiscal revenue share of the local government decreased from 77.98% to 44.30% immediately after the reform.…”

Section: Introductionmentioning

confidence: 99%

Examining the Impact of Fiscal Resources on Anti-Poverty Expenditure: Evidence from China

Qin

Sohail

2023

Sustainability

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In developing countries, anti-poverty programs are often implemented by local governments. However, due to the limitation of fiscal resources, the amount of anti-poor expenditure by the local government is generally less than what is needed for the poor. In this paper, we investigate whether an increase in the fiscal resources of local government will lead to an increase in anti-poor fiscal expenditure using county-level Chinese data. Using the fixed effect model, we show that local governments will put more fiscal resources into the minimum living standard guarantee (MLSG) system if they receive more intergovernmental transfers from high-level governments, but this effect only exists in urban areas. Moreover, the off-budget fiscal revenue does not affect the anti-poverty expenditure, both in rural and urban areas.

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Estimating local fiscal multipliers using political connections

Cited by 11 publications

References 23 publications

Does Fiscal Spending Affect TFP? Evidence from Chinese Provinces

Does Fiscal Spending Affect TFP? Evidence from Chinese Provinces

Thrive or Throttle: The Impact of Government Transfers on Economic Growth in China

Examining the Impact of Fiscal Resources on Anti-Poverty Expenditure: Evidence from China

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