In Search of Fiscal Interactions: A Spatial Analysis ofChinese Provincial Infrastructure Spending

Using a dataset for 31 C hinese provinces from 1998 to 2006, this paper provides a spatial Durbin panel analysis to test for fiscal interactions among C hina's provinces in their public spending on infrastructure. We find significant positive interactions across C hinese provincial governments. Further analysis attempting to distinguish between the possible sources of such fiscal interactions reveals evidence of expenditure competition instead of yardstick competition.