Fiscal Decentralisation and Local Public Good Provision in China

Fiscal incentive is closely related with extra budgetary revenues.This paper examines the impact of fiscal revenues under decentralisation on responsiveness of public goods provision to real local needs. There are some problems associated with the provision of 'public goods in China: With the huge base of extra budgetary revenue, the size of local government would be expanded resulting heavier burden on local people. Second, decreasing return to scale in local extra budgetary expenditure; thirdly, urbanisation is negatively correlated with local extra budgetary expenditure on urban maintenance indicating that in China the process of industrialisation and urban construction arenot consistent.