In Search of Fiscal Interactions: A Spatial Analysis of Chinese Provincial Infrastructure Spending

Using a dataset for 31 Chinese provinces from 1998 to 2006, this paper provides a spatial Durbin panel analysis to test for fiscal interactions among China's provinces in their public spending on infrastructure. We find significant positive interactions across Chinese provincial governments. Further analysis attempting to distinguish between the possible sources of such fiscal interactions reveals evidence of expenditure competition instead of yardstick competition.