Fiscal Decentralization and Regional Growth: Evidence from China

This paper investigates the relationship between city-level fiscal decentralization and economic growth of cities within China, incorporating the new perspective of spatial analysis. Utilizing data on fiscal decentralization alongside other economic metrics from the period 2010 to 2019, the research aims to delineate the influence of fiscal decentralization on urban economic expansion. Notably, this analysis integrates an assessment of the spatial spillover effects to enhance the depiction of growth patterns of cities. The empirical results suggest that fiscal decentralization is positively correlated with economic growth at the city level. Meanwhile, the efficacy of fiscal decentralization in stimulating economic growth is found to be weaker in cities that serve as provincial capitals. As an additional result, the study also uncovers that spillover effects from adjacent cities predominantly serve as a deterrent to economic growth in neighboring municipalities.