Growth Effects of Fiscal Decentralization: Empirical Evidence from China's Provinces

Jalil, Abdul; Feridun, Mete; Sawhney, Bansi

doi:10.2753/ree1540-496x500411

Cited by 27 publications

(16 citation statements)

References 26 publications

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“…Jalil et al. () document a significant and positive relationship between fiscal decentralization and economic growth in most provinces in China in both short and long terms over the 1979–2009 period. More interestingly, the non‐linear relationship between fiscal decentralization and economic growth is found in some studies.…”

Section: Literature Reviewmentioning

confidence: 99%

Fiscal Decentralization and Economic Growth of Vietnamese Provinces: The Role of Local Public Governance

Thanh

Nguyen

2019

Ann Public Coop Econ

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This study offers an insight into the public governance role in the relationship between fiscal decentralization and provincial economic growth in Vietnam. Fiscal decentralization measures are assorted. Applying a sequential (two‐stage) estimation for the panel data of 62 provinces of Vietnam over the 2006–2015 period, we find that first, fiscal decentralization is positively related to the economic growth of Vietnamese provinces. Second, the effects of public governance on economic growth vary across provinces depending on various levels of local public governance. Interestingly, the effect of fiscal decentralization is strengthened when this variable is added along with better quality of public governance. In a region of high public governance quality, fiscal decentralization exerts a positive effect on its economic growth. Our findings imply that the design of fiscal decentralization needs to be associated with local governments’ ability of public governance to improve the local economic growth.

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Section: Literature Reviewmentioning

confidence: 99%

Fiscal Decentralization and Economic Growth of Vietnamese Provinces: The Role of Local Public Governance

Thanh

Nguyen

2019

Ann Public Coop Econ

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“…In Asia, China, India, Indonesia and Vietnam have all conducted fiscal decentralization to various degrees. China represents a theory-validating case to illustrate the growthinducing effects of fiscal decentralization (Montinola et al, 1996;Lin and Liu, 2000;Jalil et al, 2014). Vietnam is a similar case where fiscal revenue decentralization arguably contributes to economic liberalization from a planned economy (Nguyen and Anwar, 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Despite their importance, provincial capitals have rarely been studied systematically as a distinct level of jurisdiction. To date, most studies have focused on centralprovincial and provincial-prefectural fiscal relationships (Lin and Liu, 2000;Zhan, 2009;Feng et al, 2013;Ko and Zhi, 2013;Jalil et al, 2014). This is partly because of the lack of single-sourced data for provincial capitals.…”

Section: Provincial Capitals In China: the Diverging Fiscal Pathsmentioning

confidence: 99%

Fiscal Decentralization or Centralization: Diverging Paths of Chinese Cities

Yang

2019

China and World Economy

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If fiscal decentralization promotes growth, why do some regions decentralize more than others? This article identifies the growing divergence of fiscal centralization among Chinese cities and explains it in a public finance framework. It argues that fiscal decentralization and its economy-liberalizing effect entail significant short-term fiscal risk. The more a locality relies on uncompetitive business ownership for fiscal revenue, the less likely fiscal decentralization is to occur. This article compiles a dataset of 20 provincial capitals between 1999 and 2016 to test for the connection between a city's tax base and its fiscal centralization level. It then pairs two "most similar" cities to trace how fiscal security concerns drove their fiscal and economic policies apart. This article adds a micro-level perspective to the literature on fiscal federalism. By pointing out the fiscal constraints confronting local governments, it offers a new angle to understand the different growth paths of Chinese cities.

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“…The empirical evidence on fiscal decentralization-growth nexus can be drawn from the recent literature review. First, some papers use only one measure of fiscal decentralization to examine the fiscal decentralization-growth relationship [18] [19]. [18] find the positive impact of fiscal decentralization in Spain using S-GMM for a panel data of 17 regions over the period 1970-2000.…”

Section: Literature Reviewmentioning

confidence: 99%

“…[18] find the positive impact of fiscal decentralization in Spain using S-GMM for a panel data of 17 regions over the period 1970-2000. Similarly, [19] indicate a positive fiscal decentralization-growth relationship in 28 provinces in China in both short run and long run through ARDL (Autoregressive-Distributed Lag) bounds tests and PMG (Pooled Mean Group) estimators with time series data from the period 1979-2009. They argue close relations between provincial governments and their constituents may promote to invest in human capital, and education and training at the local level, which results in a high growth rate.…”

Section: Literature Reviewmentioning

confidence: 99%

The Effect of FDI on the Relationship between Fiscal Decentralisation and Economic Growth in Vietnam: Empirical Evidence from Provincial Data

Bổn¹

2019

TEL

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Fiscal decentralization not only promotes economic growth but brings more power to local governments in attracting FDI inflows as well. However, economists and policy-makers often strongly debate the influence of FDI on the fiscal decentralization-growth relationship. This paper empirically investigates the role of FDI in the relationship between fiscal decentralization and economic growth for a panel dataset of 52 provinces in Vietnam during the period 2007-2016 using the two-step GMM Arellano-Bond and FE-2SLS estimators. The estimated results confirm that fiscal decentralization and FDI significantly enhance economic growth, but their interaction terms impede growth rate. In addition, public investment is a significant determinant. These findings suggest some important policy recommendations for central governments in developing countries, especially Vietnam.

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Growth Effects of Fiscal Decentralization: Empirical Evidence from China's Provinces

Cited by 27 publications

References 26 publications

Fiscal Decentralization and Economic Growth of Vietnamese Provinces: The Role of Local Public Governance

Fiscal Decentralization and Economic Growth of Vietnamese Provinces: The Role of Local Public Governance

Fiscal Decentralization or Centralization: Diverging Paths of Chinese Cities

The Effect of FDI on the Relationship between Fiscal Decentralisation and Economic Growth in Vietnam: Empirical Evidence from Provincial Data

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