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IMF Staff Papers Logo Last updated: May 2002
Volume 48, Special Issue
Federalism With and Without Political Centralization: China Versus Russia
Olivier Blanchard and Andrei Shleifer

Full Text of this Article (PDF 71K)

Abstract: In China, local governments have actively contributed to the growth of new firms. In Russia, local governments have typically stood in the way, be it through taxation, regulation, or corruption. We argue that the difference can be traced to lies in the degree of political centralization present in China, but not in Russia. In China the central government has been strong and disciplined enough to induce local governments to favor growth. In Russia, it has not. We agree, but with an important caveat. We believe the experience of Russia indicates that another ingredient is crucial, namely political centralization. [JEL P30, P50]

© 2001 International Monetary Fund