Elections, Fiscal Reform and Public Goods Provision in Rural China

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Public services provision in the developing world, including China, is crucial for rural development and poverty reduction. Although there has been much effort focused on public goods investment in China in recent years, there are still great differences among villages in the level of public goods investment. This study seeks to explain these differences by focusing on the effect of community governance on public goods provision at the village level, including investment into roads, water control and schools. During the recent past several years, village governance in rural China has undergone a series of fundamental reforms. Arguably, the advent of direct elections for village leaders and the rural Tax for Fee Reforms are two of the most important shifts in the ways that communities manage themselves. Using a nearly nationally representative sample of communities from survey data that includes information from more than 2400 villages in rural China, we find that the direct election of a villages leader leads to increased public goods investment in the village. The paper also demonstrates that the rural Tax for Fee Reforms, ceteris paribus, has a negative effect on public goods, especially on investment by the village itself.

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