Transfer-Based Decentralization and Poverty Alleviation: Evidence from a Quasi-Experiment in China

In: Publius: the journal of federalism, Band 49, Heft 4, S. 694-718

Abstract

China launched a massive poverty alleviation program in the 1990s that focused on nationally designated poverty counties. By injecting earmarked transfers with clear spending mandates, the central government hoped for major investments in productive capacities in the poverty counties so they could develop sustainably. Comparing fiscal data of county governments through a regression discontinuity approach, we show that the opposite was true. Poverty county officials failed to make extra investments in production-oriented areas while diversion of central transfers for administrative consumption was rampant. This article develops a better empirical strategy to challenge some earlier findings. Theoretically, this article offers a different case of elite capture under a non-democratic regime. Our focus on poverty regions also reveals the importance of maintaining bureaucratic support in local politics. It complements the popular notion that Chinese local officials are mostly geared toward growth.