Fiscal Decentralization and Agricultural Growth in China

Local government has advantage in public good provision. So the efficiency of public good provision will get improved after fiscal decentralization. Since public good are important for agricultural growth, fiscal decentralization will promote agricultural growth. However, the promotion of local government officials depends on the economic growth. So, local officials invest fiscal fund to the industry sector as much as they can because the productivity of industry is higher than that of agriculture. This goes against to agricultural growth. An empirical analysis is carried out to test the net effect of fiscal decentralization on agricultural growth and find that fiscal decentralization plays a significantly positive role in promoting agricultural growth.