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Chinese “Pressure-Type” Fiscal Incentives and Local Governments’ “Helping Hand”
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TitleChinese “Pressure-Type” Fiscal Incentives and Local Governments’ “Helping Hand”  
AuthorZhenfa Xie and Jin Yan  
OrganizationSchool of Economics, Xiamen University; 
Key WordsChinese Pressure-Type Fiscal Incentives; Abolition of Agriculture Tax; Helping Hand 
AbstractLocal governments face complex and diverse pressures from various resources under Chinese pressure system during the period of economic and social transition. Extracting actively fiscal revenues is the main way for local governments to cope with pressures, which forms Chinese “pressure-type” fiscal incentives. With these incentives, local governments have two strategies: one is “grabbing hand” to extract resources from below directly, and the other is “helping hand” to increase tax base by developing economy. Using the nation-wide abolition of agriculture tax in 2005 as the quasi-experiment of fiscal revenue pressures, the paper focuses on local governments’ helping hand to response to the change of local fiscal pressures, which is a complement to the current literatures on “grabbing hand”, and help to understand comprehensively the effect of Chinese pressure-type fiscal incentives on local governments’ behaviors. The empirical results show that a county which suffered more public revenue loss due to the agriculture tax abolition among the same prefecture would have more industries’ outputs, which implies that a county with more fiscal pressure has a stronger motive to develop economy with helping hand. From the perspective of tools controlled by local governments, the paper finds that relaxing environmental regulation is the key tool of local governments to increase the industries’ outputs, and the effect is mainly reflected in the increasing output of existing enterprises. Furthermore, the paper finds that Chinese pressure-type fiscal incentives have the equal effect for local governors (including party secretary and mayor) of prefecture level with different ages, and the young local governors don’t have significant behavioral differences. 
Serial NumberWP1150 
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