Does Concurrent Political Leadership Appointment Affect Local Fiscal Allocation in China?

Abstract

ABSTRACT This study examines how power centralization at the provincial level affects the allocation of fiscal expenditures in China. The authors employ a quasi-natural experimental setting formed by a regulation established in 2002 stating that, in general, provincial Chinese Communist Party (CCP) secretaries should be recommended as candidates for chairmen of the Provincial People’s Congress (PPC). An empirical analysis of provincial panel data finds that Party secretaries concurrently serving as PPC chairmen not only inflates the size of local public expenditures, but also limits fiscal expenditures supporting social welfare and livelihood programs due to a tendency among local leaders to invest more in economic programs that could generate short-term economic growth. Furthermore, power centralization and constrained congressional power could reduce the efficiency of local public expenditures.