科学研究

Associate Professor, received her PhD from University of Maryland in 2011 and joined Renmin University of China in the same year. She used to work at the World Bank from 2010 to 2011. The focus of her research lies in health economics and public finance. Publications include: “The Impact of Water Quality on Health: Evidence from the Drinking Water Infrastructure Program in Rural China”, Journal of Health Economics, 2012;“Fiscal Decentralization and Local Expenditure Policy”, China Economic Review, 2014;  “Health Shocks, Village Elections, and Household Income: Evidence from Rural China”, China Economic Review, 2014; “Soft Budget Constraints in China: Evidence from the Guangdong Hospital Industry”, International Journal of Healthcare Finance and Economics, 2009.

The literature has attributed the miracle of China’s economic growth to its governance hierarchy (or aregionally decentralizedauthoritarian system)—a combination of political centralization and regionally economic decentralization (Maskin, Qian, and Xu, 2000; Qian and Xu, 1993; Qian, Roland, and Xu, 2006; Xu, 2011). In this political and economic institution central government creates yardstick competition on economic growth among local governments through their absolute personnel control. Yet, the direct empirical evidence on that mechanism is rather limited. This paper focuses on a unique reform in China’s goverance structure, which circumvents prefectures and allows counties to interact directly with their corresponding provinces in fiscal disciplines, namely the Province Directly Governing County fiscal reform.In this way, this reform intensifies the aforementioned yardstick competition. Using a difference-in-differences propensity score matching strategyand a large fiscal dataset at the county level from 2000 to 2007, we identify the causal impacts of the reform on the most commonly used fiscal tools by local governments—their expenditure policy. Our results show that the reform increases government spending and leads to a fund allocation with a larger weight on capital construction and smaller weights on education.