Competitive Governments, Fiscal Arrangements, and the Provision of Local Public Infrastructure in China : A Theory-Driven Study of Gujiao Municipality

This article introduces the analytical framework of quot;government competitionquot; which encompasses current models of Chinese local government like the quot;developmentalquot; or quot;entrepreneurial statequot; as special cases. The argument is based on a detailed empirical case study of Gujiao Municipality (Shanxi Province) which is put into perspective with reference to two other cases (Tongxiang, Zhejiang Province, and Zhangjiagang, Jiangsu Province). It is argued that the specific interaction between fiscal reforms and local approaches to infrastructure finance is the outcome of vertical and horizontal competition among governments. This competition is conceived as a complex system of formal and informal institutions undergoing endogenous change. Rooted in historically determined institutions like the regional property rights system in local resources, the system evolves through political entrepreneurship crafting competitive strategies and institutional innovations. The peculiar features of Chinese local government like budgetary dualism, local resource ownership or fiscal bargaining should not be conceived as quot;policy failuresquot; in terms of deviations from centrally imposed formal institutions. They are defining features of the institutional framework of government competition in China, in which the central government is only one player