The dynamics of redistribution, inequality and growth across China's regions

Yang, Xiaoliang, Barros, Lucy, Matthews, Kent ORCID: https://orcid.org/0000-0001-6968-3098 and Meenagh, David ORCID: https://orcid.org/0000-0002-9930-7947 2024. The dynamics of redistribution, inequality and growth across China's regions. Journal of Policy Modeling 10.1016/j.jpolmod.2024.01.011

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Abstract

China’s experience has triggered debate over a trade-off between aggregate growth and regional equity. We develop a three-region model of China where local government decisions are driven by central government tax transfer instruments. These affect local TFP dynamics and regional inequality. We find regional asymmetry in how transfers are awarded. Transfer policies pursued since the 1994 tax-sharing reform prevented a 15% rise in regional inequality, at an 8% cost to aggregate GDP. Temporarily reducing local government non-tax fees on private firms in poorer regions lowers regional inequality permanently at no aggregate growth cost, as would imposing uniformity in central transfer rules.

Item Type:	Article
Date Type:	Published Online
Status:	In Press
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0161-8938
Date of First Compliant Deposit:	25 February 2024
Date of Acceptance:	4 January 2024
Last Modified:	26 Feb 2024 12:15
URI:	https://orca.cardiff.ac.uk/id/eprint/166543

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