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China and Global Development Seminar Series

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Institute for China and Global Development

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presents

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Provincial and Local Governments in China:

Fiscal Institutions and Government Behavior
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by Prof. Roger Gordon

University of California at San Diego

 

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September 6, 2011 (Tuesday)

11:30 a.m. to 1:00 p.m.

 

Room 910, KKL Building

The University of Hong Kong

Pokfulam Road, Hong Kong

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To view Prof. Roger Gordon's presentation slides, please click here.

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Remarks:  Non-HKU staff/students who are interested in attending this seminar, please register with Ms. Angelina Hung by sending your full name, affiliation and contact details to info@hiebs.hku.hk.  For enquiries, please call 2547 8472. 

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Abstract

Provincial and local governments in China play a key role in the economy, not just in providing local public services but also in affecting the allocation of resources in the local economy.  Some of the key successes as well as some of the key problems during the reform period are attributed to the behavior of local governments.  In order to understand the behavior of the Chinese economy, it is therefore essential to understand the determinants of local government behavior.  Past models of local government behavior, based on a U.S. context, focus on the incentives created by ˇ§voiceˇ¨ and ˇ§exit.ˇ¨  Yet neither source of incentives is of much relevance in China, given the lack of elections and the residency restrictions created by the hukou system.  This paper instead builds on earlier models that assume that officials act to maximize their fiscal profits, equal to tax revenue minus government expenditures.  The resulting forecasts for government behavior seem in line with a variety of stylized facts.  The paper then explores reasons why these incentives can lead to inefficient allocations, and how national policies can be modified to improve the incentives faced by local governments.

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About the Speaker  

Prof. Roger Gordon has been a professor of economics at University of California at San Diego since 2000.   Prior to then, he taught at the University of Michigan and Princeton University, and had been a member of the technical staff at Bell Laboratories.  He is a past editor of the Journal of Economic Literature, the Journal of Public Economics and the American Economic Review, a research associate of the National Bureau of Economic Research and the Centre for Economic Policy Research, and a Fellow of the Econometric Society and the American Academy of Arts and Sciences.  His past research has focused on a wide range of questions within public economics.



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