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Does flattening government improve economic performance? Evidence from China

Author

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  • Li, Pei
  • Lu, Yi
  • Wang, Jin

Abstract

This paper examines a causal relationship between the flattening of a government hierarchy and economic performance by exploiting a panel data set on government reorganization in China from 1995 to 2012. Delayering has led to increases in revenue and inter-governmental transfers for county governments, but the associated enlarged span of control makes it difficult for upper-level governments to coordinate and monitor local ones. This has led to a reduction in county governments' total public expenditure and pro-growth expenditure, as well as an increase in land corruption. Overall, the flattening of the government hierarchy has a negative effect on economic performance.

Suggested Citation

  • Li, Pei & Lu, Yi & Wang, Jin, 2016. "Does flattening government improve economic performance? Evidence from China," Journal of Development Economics, Elsevier, vol. 123(C), pages 18-37.
    • Handle: RePEc:eee:deveco:v:123:y:2016:i:c:p:18-37
    DOI: 10.1016/j.jdeveco.2016.07.002
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    More about this item

    Keywords

    Flattening; Government; Hierarchies; Organization structures; Province managing county;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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