| Abstract | This paper explores the influence of regional governments’ fiscal policy mode on industry growth. Based on the Difference-in-Difference Method, using the 1998-2007 regional, industry and firm data comprehensively, we find that, the counter-cyclical fiscal policy of regional governments has positive influence on industry growth. The stronger the industry depends on outside finance, the larger influence the more counter-cylical fiscal policy has. After considering the omitted variables and endogenity problems, this influence is still significant and robust. Output, labor productivity and TFP is affected positively to different extent, with capital accumulation and technological efficiency change the main sources of labor productivity. Analysing the factors that influence the policy performance, we find that, on the macro level, the decentralization-cored fiscal institution strengthens the policy’s effect; while on the micro level, subsides as important fiscal resource, improve the policy’s performance, but it’s constrained by the inefficient political connections. |