JDE-Fiscal Decentralization

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1、JournalofDevelopmentEconomics103(2013)107–123ContentslistsavailableatSciVerseScienceDirectJournalofDevelopmentEconomicsjournalhomepage:www.elsevier.com/locate/devecFiscaldecentralization,endogenouspolicies,andforeigndirectinvestment:TheoryandevidencefromChinaa

2、ndIndia☆YongWang⁎DepartmentofEconomics,HongKongUniversityofScienceandTechnology,HongKongarticleinfoabstractArticlehistory:Apolitical-economymodelisdevelopedtoexplainwhyfiscaldecentralizationmayhaveanon-monotoniceffectReceived30March2011onFDIinflowsthroughendogen

3、ouspolicies.Toomuchfiscaldecentralizationhurtscentralgovernmentincentives,Receivedinrevisedform26August2012whereastoolittlefiscaldecentralizationrendersthelocalgovernmentsvulnerabletocapturebytheprotectionistAccepted21January2013specialinterestgroups.Moreover,th

4、elocalgovernment'spreferenceforFDIcanbeendogenouslypolarized;there-Availableonline1February2013fore,asmallchangeinfiscaldecentralizationacrosscertainthresholdvaluesmayleadtoadramaticdifferenceinequilibriumFDIinflows.Empiricalinvestigationssupporttheideathatthedi

5、fferenceinfiscaldecentralizationisanJELclassification:D78importantreasonforthenine-folddifferenceinFDIpercapitabetweenChinaandIndia.Cross-countryregressionF23resultsalsosupporttheinverted-Urelationship.H77©2013ElsevierB.V.Allrightsreserved.O33Keywords:Fiscaldece

6、ntralizationFDISequentiallobbyTechnologyadoptionGrowthanddevelopmentChinaandIndia1.Introductionsimplifyinglicenseapplication,charginglowfeesforlanduse,buildingfacilitatinginfrastructure,etc.Incontrast,wedidnotseesuchenthusi-Foreigndirectinvestment(FDI)helpsfac

7、ilitateeconomicgrowthasmforFDIatthecentralorthelocalleveloftheIndiangovernmentindevelopingcountriesbecauseitnotonlybringsmorephysicalcap-untilveryrecently.Forinstance,thecorporateincometaxrateon1italbutalsoembodiesbetterforeigntechnology.However,inreality,fore

8、ign-investedfirmswas41%inIndiabutwellbelow33%inChina2governmentpoliciestowardFDIvarytremendouslyacrosscountries.in2004.ThedefactoinstitutionalbarrierstoFDIarealsomuchhigherForexampl