The Impact of Fiscal Decentralization on Regional Industrial Structure

Fiscal decentralization defines the dimensions of how much local governments can take advantage of the fiscal resources, thus creating significant changes to the fiscal and industrial policies that the local governments adopt. The paper makes a regression analysis between fiscal decentralization and industrial structures by provincial panel data of year 1997-2009, and it shows that, (1) fiscal decentralization has a significant effect on the industrial structures evolution throughout China, (2) the degree of the effects varies among different parts of China. These suggest that the industrial policies should avoid homogeneity and develop industries with local features. In another word, industrial policies should be adjusted according to regions and areas.