Fiscal Decentralization and Fiscal Multiplier in China

1 Nov 2021

Research

Economics

Guo, Fei; Yan, Isabel Kit-Ming

Published in B.E. Journal of Macroeconomics, November 2021

A fundamental aspect of China's transition to a market economy was the change of fiscal decentralization marked by the tax reform in 1993. This paper examines the effect of revenue and expenditure decentralization and their divergences on fiscal spending multipliers in China using nationally aggregate and provincial-level data from 1978 to 2017. Isabel Yan of the Department of Economics and Finance and co-authors show that expenditure decentralization weakens the efficacy of spending policies, while revenue decentralization enhances the efficacy. Moreover, the divergence of revenue and expenditure decentralization has decreased the aggregate and provincial spending multipliers.

Prof. YAN Kit Ming Isabel

Prof. Isabel Yan joined the City University of Hong Kong in 2002 after obtaining her Ph.D. degree in Economics and M.Sc. degree in Statistics from Stanford University. Her research specialises in international economics and applied econometrics. Her research has been published in Journal of International Economics, Journal of International Money and Finance, Journal of Money, Credit and Banking, among others.

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