Why Do More Open Chinese Provinces Have Bigger Governments?

The transition of China towards a market economy was accompanied by a vast fiscal decentralization movement. Econometric analysis of the determinants of public expenditure of the Chinese provinces does not permit rejection of the hypotheses that (i) the behavior of provinces is similar to that of governments in developing economies significantly affected by external shocks, and (ii) in order to alleviate external risk, they take control of a more significant share of the revenues of the economy. Copyright Blackwell Publishing Ltd 2004.