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Determinants of Chinese Government Size: An Extreme Bounds Analysis

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Abstract

This paper studies the factors associated with the size of the public sector as measured by government spending at the level of Chinese provinces using the method of extreme bounds analysis to identify robust correlates with public sector size. We find that almost all traditional “economic” and “social stability” factors are insignificant and not robust to model specification changes. In contrast, “political” factors such as the degree of fiscal decentralization and national transfers to provincial governments tend to be significant and robust. Our findings suggest that repeated government attempts to reduce the relative size of the Chinese government sector have failed because the political factors determining government spending haven’t changed.

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  • Philip Gunby & Yinghua Jin, 2016. "Determinants of Chinese Government Size: An Extreme Bounds Analysis," Working Papers in Economics 16/25, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:16/25
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/1625.pdf
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    More about this item

    Keywords

    Government Size; Fiscal Decentralization; Wagner’s Law; Extreme Bounds Analysis;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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