11. Why Have China Had a Good Infrastructure: Decentralization Competition, Governance and Infrastructure Investment Decisions

Blanchard and Shleifer (2000).

Shleifer and Vishiny (2004).

World Bank (1995).

Prud′hommer, Infrastructure and Development, Paper prepared for The ABCDE (Annual Bank Conference on Development Economics), 2004-03-05.

Arrow and Kurz (1970).

In concept, public capital is relative to private capital, mainly referring to the capital formed by government investment, both of which constitute the total capital stock. Obviously, the most important component of public capital (especially productive public capital) is infrastructure, and some studies regard the two as equal. Therefore, a considerable part of our literature review is directed at public capital. As we can see from the latter part of the article, in order to estimate the return on infrastructure and the elasticity of output, many studies, when setting the production function, deducted the infrastructure stock from the total capital stock in order to obtain the private capital stock.

Of course, we can also interpret the mainstream economics studies as a revival of the literature on development economics (Murphy, Shleifer, Vishny, 1989; Justman, 1996).

Aschauer (1989a, b, c, 1995).

Démurger (2001).

Barro (1991).

Fan and Zhang (2004).

Fan Jiuli, Bai Baol (2004a, b).

Fan Jiuli, Bai Baoli, Pan Quan (2004c).

Randolph and Bogetic (1996).

North and Thomas (1973).

Henisz (2002).

Evans (1992).

Rauch (1995).

Hu Shudong (2001). He made a systematic record and analysis of the changes in the intergovernmental financial system and the central-local relations since the 1950s.

Cheng Shiyi, Zhang Jun (2008).

Tiebout (1956).

Oates (1972).

Qian and Weingast (1997), Qian and Roland (1998), Cao et al. (1999).

Lin and Liu (2000).

Zhang Jun, Jin Yu (2005).

Of course, there are also some economists who do not support the conclusion of fiscal federalism. For example, Young (2000) and Poncet (2002) argued in their empirical research that China's fiscal decentralization in fact led to the continuous market segmentation, which, in general, is not conducive to the formation of a unified domestic market and improvement of growth efficiency. Chen Kang and others (2002) believe that China's fiscal decentralization (especially the tax sharing system in 1994) has turned the local government from a “helping hand” to a “predatory hand”. Ping Xinqiao and Bai Jie (2006) found in their study that the non-budget income in China has expanded the scale of local governments, but the growth of non-budget expenditure has led to the deterioration of the efficiency of capital allocation.

Shleifer (1997), Zhuravskaya (2000).

Bardhan (2006).

Li and Li (2005). They made an excellent empirical research on how the “achievements” of the local Chinese officials would influence the probability of their promotion.

Perkins (2005).

Unlike the private sector, the public sector is characterized by multi objectives and multi tasks, difficulty in performance measurement and the different natures of agents. As a result, the research on the incentive mechanism of government departments has become a very active topic for economists in the past 20 years. Wang Yongqin and Ding Juhong (2006) provided a good literature review of the incentive mechanism for the public sector.

In the literature of industrial organizations, the so-called “yardstick competition” means that the competition policy of an enterprise is chosen by observing the performance of other enterprises. In the field of politics or public sector, the meaning of yardstick competition is that when the higher authority can use the performance of other local governments to assess and evaluate a local government, local governments will engage in a mutual imitation competition among themselves. For relevant literature, refer to Besley and Case (1995).

Treisman (2000).

Shleifer and Vishiny (2004).

In China, to overcome the shackles of “left” ideology and get rid of the influence of the old system as soon as possible are important contents of the ideological emancipation movement and the reform of the cadre system promoted by Mr. Deng Xiaoping. He put forward the political management goal and strategic project to quickly foster younger cadres with professional knowledge. In the Chinese literature, Chen Dongqi (2000) summed up the experience of the reform of the Chinese government system and the improvement of the government administrative efficiency since the reform.

Bardhan (2006) also made a comparative analysis of the political systems and rule of government in China and India in recent papers.

Haggard (1990). It is found in study that different from democratic government, politically centralized governments often do not face the pressure of interest group or redistribution.

Zhang Jun (2006). Based on the econometric analysis of panel data of 29 provinces and cities in China during the years of 1987–2001, it is found that, after controlling other factors, the growth of the proportion of government expenditure has a positive impact on TFP growth.

Przeworski and Limongi (1993).

Demurger (2001).

Wei Xinya (2002).

Li Boxi, Liu Deshun (1995).

The mathematical procedure is: \(X=({x}_{1},\dots,{x}_{p})\), set \(F={a}_{1}{x}_{1}+\cdots +{a}_{p}{x}_{p}={a}^{\prime}X\), find the coefficient \(a(a{a}^{\prime}=1)\), maximize \(\mathrm{var}(F)\), that is, \(\mathrm{var}(F)=\mathrm{var}({a}^{\prime}X)={a}^{\prime}\mathrm{var}(X)={a}^{\prime}\Sigma a\) is the largest. Set the characteristics root of \(\Sigma \) as \({\lambda }_{1}\ge {\lambda }_{2}\ge \dots \ge {\lambda }_{p}>0\), the corresponding orthonormal basis is \({u}_{1},{u}_{2},\ldots,{u}_{p}\). Then \(\mathrm{var}(F)={\lambda }_{1}\), \(a={u}_{1}\), mark \({F}_{1}={{u}^{\prime}}_{1}x\), F₂ has nothing to do with \({F}_{1}\), \({F}_{2}={{u}^{\prime}}_{2}x\), and the rest can be deduced in this way.

The principle of the scoring method is that the original maximum value of each year is determined to be 100 points, the minimum is 0 point, and other points are calculated according (original score-the minimum vale) × 100/(maximum value − minimum value).

Lu Minghong (2002).

Yang Yongheng (2005).

Weighting method also has a drawback. If the original value is negative, the weighting method is not applicable. If the scoring method is used, the relative value between the two provinces is (original score is \(i\)− minimum value)/(original sore \(j\) − minimum value). If the weighting rule is used, then the original score \(i\)/original score \(j\). In general, the smaller the minimum value/original value \(i\) or \(j\) is, the more likely that the results of the two methods tend to converge. In our data, Ningxia was the province with the minimum original value, for the original values of almost all provinces are more than 5 times higher than Ningxia’s.

Chongqing was designated as a municipality directly under the central government in1997, but before that year, the stock of Sichuan included that of Chongqing. In order to make the data consistent and easier to compare, we incorporated Chongqing in Sichuan province after 1997.

Zhang Yan, Xia Jijun (2006).

Zhang Yan, Xia Jijun (2006).

It refers to four economists who jointly published a number of important papers: R. LaPorta, F. Lopez-de-Silanes, Andrei Shleifer, and R. Vishny.

LaPorta et al. (1999).

Mauro (1998).

Tanzi and Davoodi (1997).

Arelano and Bond (1991).

Fasterly and Levine (1997).

Bond (2002). In his article, he made a Monte Carlo simulation of three observation numbers—100, 250, 500. Results show that the observation values of 100 and 250 will lead to bias under differential GMM, but the number of observations in our sample was 281 under the differential GMM, and 341 under systematic GMM.

Arelano and Bover (1995).

Blundel and Bond (1998).

Zhang Jun, Wu Guiying, Zhang Jipeng (2004).

Wei Houkai (2002).

In fact, the administrative costs provided in A Collection of Statistics of New China in Fifty Years also do not include public security, procuratorial, and courts expenditures, even the expenditure records of those organs are not available. Chinese Financial Yearbook listed the two statistics separately, but only the data after 1992 was included. Therefore, the seriously inadequate data made us unable to cover expenditure of public security organs, procuratorial organs and people’s courts in the administrative expenses.

Xie Ping, Lu Lei (2005).

After 1992, China's honest index was on the decline, and investment in China's infrastructure began to accelerate after 1992. It seems that the relationship between the two is not accidental.

Kemmerling and Stephan (2002).

From the statistical point of view, the growth rate of capital construction investment of the national total level reached its peak in 1993 and 1994, respectively at 53.2% and 39.5%, which did not fall back to below 15% till 1995.

We put either of the two variables into the equation, and found that the coefficients were still not significant and did not change the results of other variables.

Rauch and Evans (2000).

Tanzi and Davoodi (1998).