Intergovernmental fiscal arrangements and provincial consumption risk sharing in China

Jennifer T. Lai*, Erin P K SO, Isabel K.M. Yan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This paper utilizes a panel data set on two major fiscal reforms in China-the fiscal contract system (FCS) in 1980-93 and the tax-sharing system (TSS) after 1994-to examine how the various aspects of intergovernmental fiscal arrangement affect the ability of the fiscal system to facilitate risk sharing. The high revenue decentralization and the proliferation of extrabudgetary revenue items in the FCS generally weakened the central government's ability to support interprovincial risk sharing. This situation was reversed in the TSS period. In addition, the effect of central-to-local transfer (transfer-in) and local-tocentral transfer (transfer-out) on risk sharing was asymmetric in the sense that transfer-out enhances risk sharing but transfer-in does not.

Original languageEnglish
Pages (from-to)45-58
Number of pages14
JournalEmerging Markets Finance and Trade
Volume50
Issue number3
DOIs
Publication statusPublished - 1 May 2014

Scopus Subject Areas

  • Finance
  • Economics, Econometrics and Finance(all)

User-Defined Keywords

  • Divergence and convergence of fiscal decentralization
  • Fiscal decentralization
  • Fiscal reform
  • Intergovernmental fiscal relations
  • Provincial consumption risk sharing
  • Transfer system

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