Grabbing Hand, Helping Hand and Tax-exceeding-GDP Growth
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| Title | Grabbing Hand, Helping Hand and Tax-exceeding-GDP Growth
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| Author | Fang Hongsheng and Zhang Jun |
| Organization | College of Economics, Zhejiang University; China Center for Economic Studies, Fudan University |
| Email | fudancenter7@yahoo.com.cn,junzh_2000@fudan.edu.cn |
| Key Words | Tax Centralization Hypothesis; Real Grabbing Hand; Real Helping Hand; Matching Interval |
| Abstract | After the tax-sharing reform in 1994, central government adopted grabbing and helping hands to realize macroeconomic stability and sustaining growth. Based on new tax centralization hypothesis and flypaper hypothesis, this paper proposes four hypotheses related to two hands to explain the phenomenon of tax-exceeding-GDP growth. Using a provincial panel data of central government's real grabbing and helping hands and System GMM method and Acemoglu et al.(2003)'s method, hypotheses are confirmed. This paper draws a basic conclusion that although there are different remarks on two hands model, this model has indeed a basic positive effect on the development of industries with high tax revenues and the phenomenon of tax-exceeding-GDP growth. Specifically, we have three important findings. First, although there is negative interaction between two hands, this model has indeed positive impact on the phenomenon of tax-exceeding-GDP growth and its explanatory power is at least 52%. Second, although this model increases tax to GDP ratio in tax flow region mainly through tax administration efficiency, it indeed stimulates local governments to try their best to develop industries with higher tax revenues. Third, this model increases tax to GDP ratio in tax inflow region mainly through the development of industries with high tax revenues. Besides, policy suggestions to improve this model are proposed. |
| Serial Number | WP414 |
| Time | 2013-02-21 |
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