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Political incentives and local government spending multiplier: Evidence for Chinese provinces (1978–2016)

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  • Zhang, Wen

Abstract

This paper uses data from Chinese provinces to examine the effects of political incentives of provincial leaders on local government spending multipliers over the post-economic-reform period. The estimation based on the local projection method provides three novel findings. Firstly, the estimated cumulative relative government spending multiplier is well above unity, and it is greater in the period after 1994 compared with before 1994. Secondly, the political incentives of provincial leaders augment the local government spending multipliers, and the effects are highly significant after 1994. Thirdly, the economic boom strengthens the augmenting effects of political incentives after 1994.

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  • Zhang, Wen, 2020. "Political incentives and local government spending multiplier: Evidence for Chinese provinces (1978–2016)," Economic Modelling, Elsevier, vol. 87(C), pages 59-71.
    • Handle: RePEc:eee:ecmode:v:87:y:2020:i:c:p:59-71
    DOI: 10.1016/j.econmod.2019.07.006
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    Cited by:

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    More about this item

    Keywords

    Fiscal multiplier; Political incentive; Chinese economy; Business cycle;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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