Fiscal Transfers From the Central Government to Provinces in China: Potential Influence of the Native-place Connections of Politburo Members

Abstract: Fiscal transfers from central to provincial governments in China have increased significantly since 1995, but few studies have examined how the fiscal transfer decisions are made and whether the demographic factors of top government leaders have influenced the decisions. This paper uses the most recently available panel data, from 1995 to 2010, to test whether the native-place connections of the politburo members of the Communist Party of China (CPC) have influenced the distribution of fiscal transfers from central government to province-level regions. Empirical results based on the panel data suggest that the native-place connections of politburo members significantly increased the fiscal transfers to members’ native provinces. The empirical findings also suggest that the native-place connections of the politburo members had more influence on the general fiscal transfer than on tax rebates and special transfers