It is puzzling why China has one of the highest investment rates in the world. In 1994 China introduced a new fiscal system. Using this natural experiment and the dynamic provincial panel data during the following period 1995-2002, we find that fiscal decentralization has a significant, positive...

Technological diffusion via FDI is essential for the economic growth of backward economies. However, institutional and policy barriers may slow down technology diffusion. Using a simple theory based on Acemoglu (2009, ch. 18), we predict that there exists an interaction (i.e., a complementary)...