(1.National School of Development, Peking University; 2. School of Economics, Xiamen University)
Abstract: Fiscal decentralization is an important institutional factor which affects the velocity of Chinese economic increase. On one hand, it can improve the quality of public goods, save administration cost, as well as promote the division and specialization of labor. On the other hand, over-competition will result in excessive market fragmentation, duplication of industries, the rich-poor gap widening, as well as corruption. Its twin blades determine that any analysis of the impact of fiscal decentralization on economic growth should not only in⁃clude the consideration of the rate of economic growth, but also the impact on the quality of economic growth.By using panel data of 28 provinces in China through the 1997-2007 period, this paper makes an analysis of the data of economic growth quality provided by Chao and Ren (2001). The influence on the quality of economic growth is explored from three angles, namely, expenditure, income and weighted autonomy, and then determined is the extent of endogeneity by applying ITCV (Frank, 2000).Empirical studies show that different aspects of measurement of fiscal decentralization yield different results of significance in terms of economic growth quality. In view of achieving a sustainable development, the local government should therefore be given more financial power while being checked in the increase of its routine power, among other things.
Key Words: Fiscal Decentralization; Economic Growth Quality; Local Goueynment