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Finding the Determinants of China’s Local Fiscal Capacity

  • School: Nottingham Business School
  • Starting: 2021
  • Funding: UK student / EU student (non-UK) / International student (non-EU) / Self-funded


Government’s fiscal revenue provides the basic financial support for the states’ functions, and its influence in economy and society is profound. Starting from the mid-20th century, numerous scholars have tried to examine such performance by taking the studies on the tax capacity regression modelling approach. Tax capacity, therefore, is defined as the hypothetical ability of a tax authority to raise tax revenue for the purpose of public finance within the existing available tax base. (see Akin, 1973; Bahl, 1971, 1972; Bayraktar, Le, and Moreno-Dodson, 2012; and Xing & Zhang, 2018)

In the existing literature, the tax revenue has been widely used as the indicator of fiscal revenue performance, but since early 21st century, there are few exceptions that began to use a wider indicator to capture the government’s true tax-like income or the wider range of fiscal revenue performance, such as Bayraktar, Le, & Moreno-Dodson (2012), Bird, Martinez-Vazquez, and Torgler (2006), Fauvelle-Aymar (1999), and Le, Moreno-Dodson, & Rojchaichaninthorn (2008).

Tax revenue is only one of the components in China’s fiscal system, and it is not necessarily vital in every stage of fiscal development. The existing revenue capacity studies in China have been focused on mainly tax revenue, and studies attempted constructing the fiscal capacity with the consideration of the salient feature of non-tax source revenue are scant. Moreover, the special social and political characteristics of China have been widely ignored in the relevant studies.

Hence in this research project, building on the bases of existing studies on the tax capacity, we constructed the current revenue ratio as the dependent variable in the regression model to represent the wider fiscal revenue capacity. The explanatory variables are including not only economic and demographic factors, but also social and political factors. Hence, a holistic and comprehensive fiscal capacity study is contextualized.


Akin, J., 1973. Fiscal Capacity and The Estimation Method of The Advisory Commission on Intergovernmental Relations. National Tax Journal (pre-1986), p.275.

Bahl, R.W., 1971. A Regression Approach to Tax Effort and Tax Ratio Analysis (Analyse de l'effort et de la pression fiscale par la méthode de régression) (Un estudio del esfuerzo tributario y de la presión fiscal mediante el análisis de regresión). Staff Papers (International Monetary Fund), 18(3), pp.570–612.

Bahl, R.W., 1972. A Representative Tax System Approach to Measuring Tax Effort in Developing Countries (Méthode utilisant un système fiscal représentatif pour mesurer l'effort fiscal dans les pays en voie de développement) (Un método de sistema tributario representativo para medir el esfuerzo tributario de países en desarrollo). Staff Papers (International Monetary Fund), 19(1), pp.87–124.

Bayraktar, N., Le, T. & Moreno-Dodson, B., 2012. Tax Capacity and Tax Effort: Extended Cross-Country Analysis from 1994 to 2009. IDEAS Working Paper Series from RePEc, pp.IDEAS Working Paper Series from RePEc, 2012.

Bird, R.M., Martinez-Vazquez, J. and Torgler, B., 2006. Societal institutions and tax effort in developing countries. The Challenges of Tax Reform in a Global Economy, 283.

Fauvelle-Aymar, C., 1999. The political and tax capacity of government in developing countries. Kyklos, 52(3), pp.391–413.
Le, T., Moreno-Dodson, B. & Rojchaichaninthorn, J., 2008. Expanding Taxable Capacity and Reaching Revenue Potential: Cross-Country Analysis. National Tax Association - Tax Institute of America. Proceedings of the Annual Conference on Taxation, pp.384–397.

Xing, W. & Zhang, Q., 2018. The effects of vertical and horizontal incentives on local tax efforts: evidence from China. Applied Economics, 50(11), pp.1222–1237.


Dr Shang Jiang

Entry qualifications

An applicant for admission to read for a PhD should normally hold a first or upper second class honours degree of a UK university or an equivalent qualification, or a lower second class honours degree with a Master's degree at Merit level of a UK university or an equivalent qualification.

International students will also need to meet the English language requirements - IELTS 6.5 (with minimum sub-scores of 6.0). Applicants who have taken a higher degree at a UK university are normally exempt from the English language requirements. A research proposal (between 1,000 and a maximum of 2,000 words) must be submitted as part of the application.

For more information please visit the NTU Doctoral School – Research Degrees webpages.

How to apply

Applications are accepted all year round.

Please visit our how to apply page for a step-by-step guide and make an application.

Fees and funding

This is a self-funded PhD opportunity. Find out more about fees and funding here.

Guidance and support

Further information on guidance and support can be found on this page.

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Shang Jiang