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Political Decentralization and Inflation: Sub-National Evidence from China

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  • Huang, Yasheng
  • Sheng, Yumin

Abstract

One possible political determinant of macroeconomic instability scholars have explored at length is decentralization, but cross-national research measuring political decentralization in terms of constitutional federalism has produced mixed evidence regarding its effects on inflation. Conceptualizing political decentralization in terms of governing political party decentralization but acknowledging the challenges of cross-national data collection, the authors suggest the utility of a sub-national approach by studying one country under single-party rule. Drawing on provincial-level cross-section time-series data, they find that political decentralization measured as the inverse of central government political control, via the ruling party, over the different provincial governments is positively correlated with provincial inflation in China during 1978–97. The finding is robust to alternative specifications, expanded year coverage and Granger causality tests.

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  • Huang, Yasheng & Sheng, Yumin, 2009. "Political Decentralization and Inflation: Sub-National Evidence from China," British Journal of Political Science, Cambridge University Press, vol. 39(2), pages 389-412, April.
    • Handle: RePEc:cup:bjposi:v:39:y:2009:i:02:p:389-412_00
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    Cited by:

    1. Vid Adrison & Masarina Flukeria, 2016. "Lowering Regional Inflation? Improve Budget Absorption," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 62, pages 67-77, August.
    2. Ying Sophie Huang & Buhui Qiu & Jiajia Wu & Juan Yao, 2023. "Institutional distance, geographic distance, and Chinese venture capital investment: do networks and trust matter?," Small Business Economics, Springer, vol. 61(4), pages 1795-1844, December.
    3. Lu, Jie, 2015. "Varieties of Governance in China: Migration and Institutional Change in Chinese Villages," OUP Catalogue, Oxford University Press, number 9780199378746.
    4. Liu, Derek Tai-wei, 2018. "The effects of institutionalization in China: A difference-in-differences analysis of the mandatory retirement age," China Economic Review, Elsevier, vol. 52(C), pages 192-203.

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