Warped Incentives and “Second-Best” Efficiency
Chinese investment booms since 1978 have invariably been led by local governments—governments at the provincial, municipality, county, township, and village levels—rather than by the central government. They may invest either directly, for example, in public works or through the enterprises they control. They may also act indirectly—by offering incentives to enterprises outside their jurisdictions or to the private sector.
KeywordsLocal Government Central Government Wind Farm Chinese Communist Party Soft Budget Constraint
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