Fiscal Decentralization and Structural Transformation
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| Title | Fiscal Decentralization and Structural Transformation
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| Author | Yan Chengliang and Zhao Wenzhe |
| Organization | Central University of Finance and Economics |
| Email | yanchengliang@gsm.pku.edu.cn；zwenzhe@163.com |
| Key Words | Fiscal Decentralization; Structural Transformation; Economic Growth; Agriculture Sector; Non-agriculture Sector |
| Abstract | This paper presents a model including both central government expenditure and local government expenditure, and we explore the impact of fiscal decentralization on structural transformation. It is found that fiscal decentralization could affect the allocation of government expenditure between central government and local government, which in turn affect economic growth and structural transformation. The impact of fiscal decentralization on structural transformation depends on the elasticity of government expenditure, and there exists an optimal fiscal decentralization, which could minimize labor share in agriculture sector. The effect of fiscal decentralization on structural transformation is indeterminate. Too large or too small fiscal decentralization could harm structural transformation. In addition, we exam the impact of fiscal decentralization on structural transformation through the panel data of 29 provinces from 1985 to 2010. The empirical result is that fiscal decentralization can enhance the process of structural transformation in China, and the result is robust. |
| Serial Number | WP995 |
| Time | 2015-12-18 |
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