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Industrialize with tax structure change: Agricultural tax abolition and local industrial growth in China

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  • Tang, Meng

Abstract

This paper examines how the abolition of agricultural tax contributes to local industrialization in China through the local government's responses. Based on difference-in-differences analysis, this paper demonstrates that the agricultural tax abolition significantly increases the county-level secondary sector's share in GDP and firm-level industrial output. Furthermore, the mechanism analysis reveals that the local governments play a crucial role in supporting industrial growth by expanding bank credits and land provisions. This paper also finds that the agricultural tax abolition positively affects firm entry, TFP, and human capital investment.

Suggested Citation

  • Tang, Meng, 2025. "Industrialize with tax structure change: Agricultural tax abolition and local industrial growth in China," China Economic Review, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:chieco:v:90:y:2025:i:c:s1043951x24002281
    DOI: 10.1016/j.chieco.2024.102339
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    More about this item

    Keywords

    Tax structure reform; Agricultural tax abolition; Government incentives; Industrialization; Chinese economy;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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