GRASSROOTS DEMOCRACY AND LOCAL GOVERNANCE:EVIDENCE FROM RURAL CHINA

GRASSROOTS DEMOCRACY AND LOCAL GOVERNANCE:
EVIDENCE FROM RURAL CHINA*

Shuna Wang **
&
Yang Yao ***
NO. E2006001    February 26, 2006

Abstract. This paper studies the impacts of village election on the accountability of the elected village committee, local fiscal sharing, and state taxation in rural China using panel data of 48 villages during the period of 1986-2002. Election is found to substantially increase the share of public expenditures in the village budget and reduce the shares of administrative costs and income handed to the township government. This shows that election enhances the accountability of the village committee, but weakens local fiscal sharing, and thus, may hurt public goods provision beyond the village boundary. In addition, election also reduces the amount of tax paid by each person in the village, which means that election does lessen the state’s grip on the grassroots society. Finally, no significant evidence is found to support the claim that the role of a more competitive election is different from that of a closed election.
Keywords: grassroots democracy, local governance, village election
JEL classification Numbers: D31, D72, H41

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