Wu, Alfred M. and Lin, Mi (2010): Determinants of government size: Evidence from China. Forthcoming in: Public Choice
Download (348kB) | Preview
This paper investigates the determinants of government size at the provincial level in China. We employ the panel data model as a platform for empirical analysis and control for endogeneity in the study. Our study shows that openness to trade and foreign direct investment (FDI) may curtail government expansion, and that the provincial-level public sector is characterized by economies of scale. This study also documents that Wagner’s law does not hold true for China. Moreover, both expenditure decentralization and revenue decentralization contribute to the expansion of China’s government.
|Item Type:||MPRA Paper|
|Original Title:||Determinants of government size: Evidence from China|
|Keywords:||Government size - Wagner’s law - Scale effects - Openness to trade - Fiscal decentralization|
|Subjects:||H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
H - Public Economics > H6 - National Budget, Deficit, and Debt > H61 - Budget ; Budget Systems
|Depositing User:||Mi Lin|
|Date Deposited:||30. Nov 2010 07:27|
|Last Modified:||30. Dec 2015 17:30|
Akitoby, B., Clements, B., Gupta, S., & Inchauste, G. (2006). Public spending, voracity, and Wagner's law in developing countries. European Journal of Political Economy, 22(4), 908–924.
Alesina, A., & Wacziarg, R. (1998). Openness, country size and government. Journal of Public Economics, 69(3), 305–321.
Andrews, R., & Boyne, G. A. (2009). Size, structure and administrative overheads: An empirical analysis of English local authorities. Urban Studies, 46(4), 739–759.
Brennan, G., & Buchanan, J. M. (1980). The power to tax: Analytical foundations of a fiscal constitution. Cambridge: Cambridge University Press.
Brødsgaard, K. E. (2002). Institutional reform and the bianzhi system in China. The China Quarterly, 170, 361–386. Burns, J. P. (2007). Civil service reform in China. OECD Journal on Budgeting, 7(1), 57–81.
Burns, J. P. (2003). “Downsizing” the Chinese state: Government retrenchment in the 1990s. The China Quarterly, 175, 775–802.
Burns, J. P. (2001). Public sector reform and the state: The case of China. Public Administration Quarterly, 24(4), 419–436.
Chen, C. (2004). Fiscal decentralization, collusion and government size in China’s transitional economy. Applied Economics Letters, 11(11), 699–705.
Cole, M. A., Elliott, R. J. R., & Zhang, J. (2009). Corruption, governance and FDI location in China: A province-level analysis. Journal of Development Studies, 45(9), 1494–1512.
Congleton, R. D. (2001). The politics of government growth. In L. Razzolini, & W. F. Shughart (Eds.), The Elgar companion to public choice (pp. 457–478). Cheltenham, UK; Northampton, MA: Edward Elgar Pub.
Cooke, F. L. (2003). Seven reforms in five decades: Civil service reform and its human resource implications in China. Journal of the Asia Pacific Economy, 8(3), 380–404.
Cusack, T. R., Notermans, T., & Rein, M. (1989). Political-economic aspects of public employment. European Journal of Political Research, 17(4), 471500.
Deng, X. (1984). Selected works of Deng Xiaoping, 1975–1982. Beijing: Foreign Languages Press.
De Witte, K., & Moesen, W. (2010). Sizing the government. Public Choice, 145, 39–55.
Ehdaie, J. (1994). Fiscal decentralization and the size of government. Washington, DC: The World Bank.
Esping-Andersen, G. (1996). Welfare states in transition: National adaptations in global economies. London; Thousand Oaks, Calif.: Sage.
Ferris, J. S., Park, S. P., & Winer, S. L. (2008). Studying the role of political competition in the evolution of government size over long horizons. Public Choice, 137, 369–401.
Fock, A., & Wong, C. P. W. (2008). Financing rural development for a harmonious society in China (Policy Research Working Paper No. wps 4693). Washington, D.C.: The World Bank.
Gelb, A., Knight, J. B., & Sabot, R. H. (1991). Public sector employment, rent seeking and economic growth. The Economic Journal, 101, 1186–1199.
Grossman, P. J. (1989). Fiscal decentralization and government size: An extension. Public Choice, 62(1), 63–69.
Halicioglu, F. (2003). Testing Wagner’s law for Turkey, 1960–2000. Review of Middle East Economics and Finance, 1(2), 129–140.
Hood, C. (1995). The “new public management” in the 1980s: Variations on a theme. Accounting, Organizations and Society, 20 (2/3), 93–109.
Hsiao, C. (2002). Analysis of Panel Data (2nd edn). New York: Cambridge University Press.
Hsiao, C., & Tahmiscioglu, A.K. (2008). Estimation of Dynamic Panel Data Models with Both Individual and Time Specific Effects. Journal of Statistical Planning and Inference, 138(9), 2698–2721.
Iyare, S.O., & Lorde, T. (2004). Co-integration, causality and Wagner’s law: tests for selected Caribbean countries. Applied Economics Letters, 11, 815–825.
Ji, X., Liang, X., & Wang, R. (2004). The assessment of county-level fiscal performances and the policy recommendations. Fujian Tribune (Humanities & Social Sciences Monthly, Fujian luntan), 4, 109–112.
Jin, J., & Zou, H. (2002). How does fiscal decentralization affect aggregate, national, and subnational government size? Journal of Urban Economics, 52(2), 270–293.
Kimakova, A. (2009). Government size and openness revisited: The case of financial globalization. Kyklos, 62(3), 394–406.
Lalvani, M. (2002). Can decentralization limit government growth? A test of the Leviathan hypothesis for the Indian Federation. Publius: The Journal of Federalism, 32(3), 25–45.
Lin, S., & Song, S. (2002). Urban economic growth in China: Theory and evidence. Urban Studies, 39(12), 2251–2266.
Liu, M. & Tao, R. (2007). Local governance, policy mandates and fiscal reform in China. In V. Shue, & Wong C (Eds.), Paying for progress in China: public finance, human welfare and changing patterns of inequality (pp. 166–189). London; New York: Routledge.
Malesky, E. J. (2004). Push, pull, and reinforcing: The channels of FDI influence on provincial governance in Vietnam. In B. J. Kerkvliet, & D. G. Marr (Eds.), Beyond Hanoi: Local government in Vietnam (pp. 285–333). Copenhagen: Nias.
Marlow, M. L. (1988). Fiscal decentralization and government size. Public Choice, 56(3), 259–269.
Martin, J. P. (1982). Public sector employment trends in Western industrialized economies. In R.H. Haveman (Eds.), Public finance and public employment, Detroit: Wayne State University Press, 1982.
Martinez-Vazquez, J., & Yao, M. (2009). Fiscal decentralization and public sector employment: A cross-country analysis. Public Finance Review, 37(5), 539–571.
Ministry of Finance. 1999-2007. Finance Yearbook of China. Beijing: China Public Finance Economics Press.
Ministry of Finance. 1999-2009. Local Fiscal Statistical Materials. Beijing: China Public Finance Economics Press.
Mueller, D. C. (2003). Public choice III. Cambridge; New York: Cambridge University Press.
National Bureau of Statistics. 1999-2008. China Statistical Yearbook. Beijing: China Statistics Press.
Ngok, K., & Zhu, G. (2007). Marketization, globalization and administrative reform in China: A zigzag road to a promising future. International Review of Administrative Sciences, 73(2), 217–233.
Ni, H., & An, X. (2008). Government size and administrative cost: a perspective of fiscal management. Chinese Public Administration, 1, 17–20.
Oates, W. E. (1985). Searching for leviathan: An empirical study. American Economic Review, 75(4), 748–757.
Ram, R. (2009). Openness, country size, and government size: Additional evidence from a large cross-country panel. Journal of Public Economics, 93(1-2), 213–218.
Ram, R. (1987). Wagner's hypothesis in time-series and cross-section perspectives: Evidence from “real” data for 115 countries. The Review of Economics and Statistics, 69 (2), 194–204.
Research Institute for Fiscal Science of the Ministry of Finance. (2002). Analysis on pay arrears at the county and township level. Chinese Fiscal Research (Caizheng Yanjiu), 4, 36–41.
Rodden, J. (2002). The dilemma of fiscal federalism: Grants and fiscal performance around the world. American Journal of Political Science, 46(3), 670–687.
Rodrik, D. (1998). Why do more open economies have bigger governments? Journal of Political Economy, 106 (5), 997–1032.
Sinha, D. (2007). Does the Wagner’s law hold for Thailand? A time series study. http://mpra.ub.uni-muenchen.de/2560/1/MPRA_paper_2560.pdf. Accessed 1 July 2009.
Stein, E. (1998). Fiscal decentralization and government size in Latin America. In K. Fukasaku & R. Hausmann (Eds.), Democracy, Decentralization and Deficits in Latin America, Paris: IDB-OECD, 1998.
Tobin, D. (2005). Economic liberalization, the changing role of the state and “Wagner’s law”: China’s development experience since 1978. World Development, 33(5), 729–743.
Wagner, A. (1893). Grundlegung der Politischen Oekonomie. Leipzig: C.F. Wintersche Verlagshandlung.
Wang, S. (2002). The political logic of the fiscal transfer system in China, Strategy and Management (zhanlve yu guanli), 3, 47–54.
Yang, D. L. (2004). Remaking the Chinese Leviathan: Market transition and the politics of governance in China. Stanford, Calif.: Stanford University Press.
Zhang, G. (2007). The determinants of the Chinese public administrative cost. Journal of Tianjin Administration Institute (Tianjin xingzheng xueyuan xuebao), 9(2), 16-20.
Zhang, G. (2008a). The determinants of provincial variants of civil service size, Journal of Public Administration (gonggong xingzheng pinglun), 1, 89–111.
Zhang, G. (2008b). Fiscal size, establishment reform and civil service size: An empirical study based on the panel data for the period 1978–2006, CASS Journal of Political Science (zhengzhixue yanjiu), 4, 97–107.
Zhong, Y. (2003). Local government and politics in China: Challenges from below. Armonk, N.Y.: M.E. Sharpe.
Zhu, Z., & Krug, B. (2005). Is China a Leviathan? http://papers.ssrn.com/sol3/papers.cfm?abstract_id=636813. Accessed 8 May 2009.
Ziramba, E. (2008). Wagner’s law: An econometric test for South Africa, 1960–2006. South African Journal of Economics, 76(4), 596-606.