Fiscal decentralization and environmental infrastructure in china

Journal Article (Journal Article)

This article provides new evidence that fiscal decentralization has supported economic development by incentiving cities to provide more sewage infrastructure. As a result of the 1994 tax reform, Chinese cities retained different shares of their value-added tax (VAT). Exploiting the persistence of this sharing system, we use the VAT share in 1995 as an instrument for the present fiscal incentives. We find that cities with higher fiscal incentives built significantly more sewage treatment capacity between 2002 and 2008. This result suggests that fiscal incentives can play a strong role in the development of city-level infrastructure.

Full Text

Duke Authors

Cited Authors

  • Liu, A; Zhang, J

Published Date

  • December 9, 2013

Published In

Volume / Issue

  • 13 / 2

Start / End Page

  • 733 - 759

Electronic International Standard Serial Number (EISSN)

  • 1935-1682

Digital Object Identifier (DOI)

  • 10.1515/bejeap-2013-0082

Citation Source

  • Scopus