Abstract:
Vertical administrative structure plays an important role in the construction of modern government. There are two major reforms of China's vertical administrative system since the reform and opening-up policy. The distribution of government power among different levels of government impact local government behaviors. In this paper, we empirically analyze the impact of two comparable reforms on expenditure size by using municipal panel data. Results indicate that the reform of “County Directly Administrated by Province” has significantly increased the scale of fiscal expenditure, but the effect of “County Administrated by City” reform on the scale of fiscal expenditure effect is not statistically significant. The results differ from different types inside reform, also different between the counties and municipal district. The reform is likely to lead to strategic behaviors of Prefectural-Level city and county governments, which may lead to expansionary expenditure.
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