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Decentralization with political trump: Vertical control, local accountability and regional disparities in China

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  • Tsui, Kai-Yuen
  • Wang, Youqiang

Abstract

Motivated by China's experience in the reform era, we study the fiscal relations between central and local governments embedded in a vertical control system with local officials appointed by the central government. The probability of their re-appointment depends, in part, on how well they perform in fulfilling their mandates from above. Self-interested local bureaucrats decide on the amount of predatory charges to be collected and the amount of public goods provided to increase their chances of survival, while at the same time maximizing the expected surplus accruing to their private agendas. Within the framework of this model, we explore how such issues as fiscal decentralization, local accountability and regional disparities interact with the stringency of the vertical control system. The paper also contributes to the discussion of the divergent experience of China and Russia.

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  • Tsui, Kai-Yuen & Wang, Youqiang, 2008. "Decentralization with political trump: Vertical control, local accountability and regional disparities in China," China Economic Review, Elsevier, vol. 19(1), pages 18-31, March.
    • Handle: RePEc:eee:chieco:v:19:y:2008:i:1:p:18-31
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    Cited by:

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    5. Feng, Juan & Lichtenberg, Erik & Ding, Chengri, 2015. "Balancing act: Economic incentives, administrative restrictions, and urban land expansion in China," China Economic Review, Elsevier, vol. 36(C), pages 184-197.
    6. Caldeira, Emilie, 2012. "Yardstick competition in a federation: Theory and evidence from China," China Economic Review, Elsevier, vol. 23(4), pages 878-897.
    7. Ge, Tao & Li, Chunying & Li, Jinye & Hao, Xionglei, 2023. "Does neighboring green development benefit or suffer from local economic growth targets? Evidence from China," Economic Modelling, Elsevier, vol. 120(C).
    8. Ding, Chengri & Niu, Yi & Lichtenberg, Erik, 2014. "Spending preferences of local officials with off-budget land revenues of Chinese cities," China Economic Review, Elsevier, vol. 31(C), pages 265-276.
    9. Maria Elkhdari (a), Samira Oukarfi (b), Samir Zine El Alaoui (b) and Youness Sahibi (c), 2021. "Are Strategic Interactions between Moroccan Local Governments Geographical or Political?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 46(1), pages 33-52, March.
    10. Tao Qian & Qi Zhang, 2017. "Fiscal Decentralization and Pattern of County Public Expenditures in a Chinese Province," Annals of Economics and Finance, Society for AEF, vol. 18(1), pages 201-226, May.
    11. Huang, Bihong & Chen, Kang, 2012. "Are intergovernmental transfers in China equalizing?," China Economic Review, Elsevier, vol. 23(3), pages 534-551.
    12. Alfred M Wu, 2019. "The logic of basic education provision and public goods preferences in Chinese fiscal federalism," PLOS ONE, Public Library of Science, vol. 14(12), pages 1-15, December.
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