Interregional Transfers and the Smoothing of Provincial Expenditure in China

Posted: 18 Jan 2007

See all articles by Kiril Tochkov

Kiril Tochkov

Texas Christian University - Department of Economics

Abstract

Interregional transfers can smooth shocks to regional revenue and prevent spending from varying across time. This paper estimates the amounts of expenditure smoothing provided by interregional net transfers to China's provinces over the 1952-2001 period. The findings indicate that net transfers minimized the volatility of provincial expenditure by cushioning a relatively large fraction of province-specific revenue shocks. However, aggregate shocks to revenue diminished the amount of smoothing, and extrabudgetary funds increased expenditure volatility. Rich provinces were better insured against province-specific revenue shocks than poor provinces. The cross-sectional disparity in expenditure smoothing widened dramatically after 1994.

Keywords: Interregional transfers, Fiscal decentralization, Regional expenditure, China

JEL Classification: E6, H72, P35

Suggested Citation

Tochkov, Kiril, Interregional Transfers and the Smoothing of Provincial Expenditure in China. China Economic Review, Vol. 18, No. 1, pp. 54-65, 2007, Available at SSRN: https://ssrn.com/abstract=957976

Kiril Tochkov (Contact Author)

Texas Christian University - Department of Economics ( email )

Box 298510
Fort Worth, TX 76129
United States
817-257-7554 (Phone)
817-257-5058 (Fax)

HOME PAGE: http://personal.tcu.edu/ktochkov

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