Skip to Content

UNU-WIDER Economic Reforms and Infrastructure Spending: Evidence from China and India

Support functions

A teenager wears torn rubber boots in a muddy local market in Bac Ha, Viet Nam. As of 2005 figures, half the world population—more than 3 billion people–is estimated to live on less than USD 2.50 a day. Bac Ha, Viet Nam. UN Photo/Kibae Park.

Table of contents

Economic Reforms and Infrastructure Spending: Evidence from China and India

This paper examines the country specific effect of policy reform on infrastructure spending in China and India. In China we have examined how marketization and decentralization has affected the composition of provincial public expenditure and in the case of India we have examined the impact of fiscal reforms on sub-national infrastructure spending. It is observed that in China with a lower marketization level in 1986–1992, fiscal decentralization had positive effect on development expenditure and negative effect on other expenditure. However, when the marketization level increased, such effects were reversed. In the case of India, the econometric estimates revealed that, in the post-economic liberalization era, financial sector reforms and fiscal reforms have adversely affected the sub-national finances and thereby the infrastructure spending. The fiscal intervention dummy found to be negative for all the sectoral expenditure, though it was expansionary for total expenditure, implying it to be committed/non-developmental expenditure driven. Thus, to conclude, as the fiscal space has been shrinking due to reform, there is an urgent need and more so in India for corrective measures to increase the fiscal space for higher infrastructure spending.
Publisher:
UNU-WIDER
Series:
WIDER Research Paper
Volume:
2009/43
Title:
Economic Reforms and Infrastructure Spending: Evidence from China and India
Authors:
Pinaki Chakraborty and Yan Zhang
Publication date:
August 2009
ISSN Web:
1810-2611
ISBN 13 Web:
97892-92302160
Copyright holder:
© UNU-WIDER
Copyright year:
2009
Keywords:
fiscal reforms; infrastructure spending; decentralization
JEL:
H54
Project:
Southern Engines of Global Growth
Sponsor:
UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Norway (Royal Ministry of Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development).
Format:
online

^ Back to top