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Fiscal Decentralization and Peasants' Financial Burden in China

Author

Listed:
  • Jing Jin

    (Central University of Finance and Economics)

  • Chunli Shen

    (University of Maryland)

  • Heng-fu Zou

    (CEMA, Central University of Finance and Economics
    Shenzhen University
    Peking University
    Wuhan University)

Abstract

This paper sheds light on the heavy financial burden on peasants in China's fiscal decentralization system. Using a political economy framework, this paper explores the tax-farming nature of China's fiscally decentralized system and examines why the system incurs a particularly heavy financial burden on peasants. Specifically, it points out that a political hierarchy financed by a tax-farming system in China, fails to contain the exploitative behavior of local officials, which results in the expenditure devolution and revenue centralization within the hierarchy. Ultimately, peasants bear the brunt of the tax burden. As the financial pressure of excessive levies and fees reaches a perilous point, peasants are resorting to violent protests. Unless a fiscally decentralized system with horizontal accountability mechanisms evolves, the country's ability to sustain a centralized polity may become increasingly undermined. A case study of township finance is used to exemplify the exploitative nature of China's fiscal decentralization system.

Suggested Citation

  • Jing Jin & Chunli Shen & Heng-fu Zou, 2012. "Fiscal Decentralization and Peasants' Financial Burden in China," Annals of Economics and Finance, Society for AEF, vol. 13(1), pages 53-90, May.
    • Handle: RePEc:cuf:journl:y:2012:v:13:i:1:jinshenzou
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    References listed on IDEAS

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    Cited by:

    1. Chunli Shen & Jing Jin & Heng-fu Zou, 2012. "Fiscal Decentralization in China: History, Impact, Challenges and Next Steps," Annals of Economics and Finance, Society for AEF, vol. 13(1), pages 1-51, May.
    2. Chi, Meiqing & Muhammad, Sulaman & Khan, Zeeshan & Ali, Shahid & Li, Rita Yi Man, 2021. "Is centralization killing innovation? The success story of technological innovation in fiscally decentralized countries," Technological Forecasting and Social Change, Elsevier, vol. 168(C).
    3. Wang, Zhiguo & Ma, Liang, 2012. "New Development of Fiscal Decentralization in China," MPRA Paper 36918, University Library of Munich, Germany.
    4. Zhiguo Wang & Liang Ma, 2014. "Fiscal Decentralization in China: A Literature Review," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 51-65, May.

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    More about this item

    Keywords

    Fiscal decentralization; Public finance; Budget; Corruption; Financial burden; China;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H1 - Public Economics - - Structure and Scope of Government
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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