The “Chinese Mode” Fiscal Decentralization and TFP:Race to the Bottom or Race to be Better
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| Title | The “Chinese Mode” Fiscal Decentralization and TFP:Race to the Bottom or Race to be Better
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| Author | Yu Yongze,Liu Dayong and Huang Qunhui |
| Organization | Industry Development Research Institute, Nanjing University of Finance & Economics ,Nanjing 210046,China；Institute of Industrial Economics of Cass, Chinese Academy of Social Science；Tianjin University |
| Email | yongze125@126.com； |
| Key Words | “Chinese Mode Decentralization”; Total Factor Productivity; Fiscal Decentralization; Race to the Bottom; Race to Be Better |
| Abstract | With the institutional background and theory of “Chinese Mode” fiscal decentralization, this paper examines whether regional total factor productivity (TFP) is led to race to the bottom or race to be better by fiscal decentralization system from the perspective of spatial economics. The theoretical model shows that the productivity among regions could have "race to be better”, however, “Chinese Mode” fiscal decentralization structure may also have negative impact on region productivity with the role of "scale” competition. Empirical results verify the positive effect of fiscal decentralization on provincial TFP and show that it benefit from the “race to be better”, meanwhile, this TFP “race to be better” effect is weakening because of political incentives and biased economic incentives. Considering TFP internal constitution, fiscal decentralization has forced technological progress (TP) and technical efficiency (TE) has more “race to be better”; and scale efficiency (SE) presents more "race to the bottom". The reason is that the excessive investment on infrastructure led by political tournaments with the short-term economic growth objective is detrimental to scale efficiency. |
| Serial Number | WP890 |
| Time | 2015-06-30 |
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