Bureaucratic Interests: Does Fiscal Decentralization Impede Efficient Governance?

Abstract

This study examines the relationship between fiscal decentralization and administrative unit reduction in China, with particular attention to the political and institutional conditions under which subnational governments resist centrally coordinated streamlining. Drawing on an original province-year panel that combines 33,297 administrative unit changes from 2000 to 2022 with fiscal, demographic, geographic, and textual data, the paper uses a game-theoretic framework and two-way fixed-effects regressions to analyze how fiscal institutions shape administrative restructuring. The results show a robust negative association between expenditure-side fiscal decentralization and administrative unit reduction: provinces with greater fiscal autonomy tend to carry out fewer reductions in administrative units. The analysis further explores two conditional mechanisms. The findings show that decentralization may hinder territorial streamlining not simply by devolving authority downward, but by altering the institutional and discursive conditions under which local actors defend existing administrative structures.

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