Regional income redistribution and stabilization: evidence from China

ABSTRACT

We estimate the effect of vertical fiscal flows in China using Bayoumi and Masson method. The results show that vertical fiscal flows have a redistribution effect on regional economy and reduce regional differences for about 30.8%. But there is no evidence shows that fiscal flows automatically stabilize the inter-regional economy. Both effects increase in recent years. Compared with other fiscal-federal countries, China has a stronger redistribution effect and weaker stability effect.

KEYWORDS:

• China
• fiscal federalism
• redistribution
• stability

JEL CLASSIFICATION:

• H77
• E62
• H23

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the National Natural Science Foundation of China [71933001].