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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. Mototsugu Fukushige & Yingxin Shi, 2017. "Intergovernmental fiscal relationship in China: a simple model based on the nonsymmetric Nash solution," Asia-Pacific Journal of Regional Science, Springer, vol. 1(2), pages 495-509, October.
    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. 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.
    8. Xiao-xiao Liu & Feng Xiong & Xingqiang Du, 2023. "Innovator or Troublemaker? The Co-evolution of Ethical Controversies, Legitimation and Institutionalisation of the Ridesharing Firms in China," Journal of Business Ethics, Springer, vol. 186(4), pages 723-737, September.
    9. 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.
    10. Huang, Bihong & Chen, Kang, 2012. "Are intergovernmental transfers in China equalizing?," China Economic Review, Elsevier, vol. 23(3), pages 534-551.
    11. 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.
    12. Yingru Li, 2012. "The spatial variation of China's regional inequality in human development," Regional Science Policy & Practice, Wiley Blackwell, vol. 4(3), pages 263-278, August.
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    14. 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).

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