From Taxation to Expropriation: The Politics of Excessive Extraction in China

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Abstract/Contents

Abstract: Many countries excessively tax firms and farmers to the extent of ruining incentives. Studies on expropriation, however, focus on cross-national variation in the nationalization of land and foreign firms; as a result, we know little about how excessive extraction—a subtle but perhaps more prevalent form of expropriation—occurs. I study the case of China, where entrepreneurs frequently complain about the excessive extraction of taxes and non-tax fees by local governments. I examine how local party-state leaders’ stronger career incentives lead to increased and excessive extraction by using both qualitative and quantitative methods. I elaborate on the specific mechanisms linking local leaders’ career incentives to the extraction of taxes and that of non-tax fees, respectively. I show how excessive extraction has actually happened by analyzing qualitative materials such as newspapers and writings by finance journalists. Quantitatively, using a large firm-level dataset and firm fixed effects models, I find that the intensity of extraction from firms systematically varies with local officials’ career incentives. Prefectural governors who come to office with patronage ties to their superiors have strong career incentives and strategically increase the extraction of local taxes and fees during their early years in office. By linking taxation to expropriation, this paper sheds new light on how unchecked political power undermines property rights.

Type of resource	text
Date created	June 4, 2020

Author	Min, Jie
Degree granting institution	Stanford University, Stanford Global Studies, Center for East Asian Studies
Primary advisor	Oi, Jean C.

Location	https://purl.stanford.edu/yk436bp9299

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License: This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).

Preferred Citation: Min, Jie (2020). From Taxation to Expropriation: The Politics of Excessive Extraction in China. Stanford Digital Repository. Available at: https://purl.stanford.edu/yk436bp9299

Stanford Center for East Asian Studies Thesis Collection

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