编号:E-2023-10-1
题目:Top-down Monitoring or Top-down Encroachment? How Centralization Undermined Fiscal Capacity in China
编辑:Yu Hao, Kevin Zhengcheng Liu
联系方式:Yu Hao,maxhao1003@pku.edu.cn.
摘要:A common feature of low-capacity states is informal and fragmented local fiscal systems outside budgetary oversight. Centralized fiscal administration is considered important for building an effective fiscal state. However, fiscal centralization may create scope for top-down encroachment between vertical levels of government and lead to negative unintended consequences. This paper studies how a centralization policy aimed at monitoring local taxation affected fiscal capacity in imperial China. We exploit predetermined variation across counties in exposure to centralization that replaced local governments’unsupervised autonomy in local revenues with transfers from provincial governments. Using newly collected administrative data on tax collection records, we find that centralization undermined fiscal capacity, measured by a large increase in central revenue deficits. Evidence suggests that counties bypassed regulation by manipulating disaster reporting and requesting tax exemption. We provide evidence consistent with the mechanism that centralization promoted provincial expropriation of local revenues, undermining counties’ fiscal condition and forcing counties to embezzle central tax and extract extra-legal levies to maintain local expenditure. Finally, we show that centralization caused an increase in protests against taxation.