Article ID Journal Published Year Pages File Type
5048060 China Economic Review 2007 12 Pages PDF
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.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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