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How Reform Worked in ChinaThe Transition from Plan to Market$
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Yingyi Qian

Print publication date: 2017

Print ISBN-13: 9780262534246

Published to MIT Press Scholarship Online: May 2018

DOI: 10.7551/mitpress/9780262534246.001.0001

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Federalism as a Commitment to Preserving Market Incentives

Federalism as a Commitment to Preserving Market Incentives

Chapter:
(p.237) 8 Federalism as a Commitment to Preserving Market Incentives
Source:
How Reform Worked in China
Author(s):

Yingyi Qian

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262534246.003.0009

We advance a new perspective in the study of federalism. Our approach views federalism as a governance solution of the state to credibly preserving market incentives. Market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures. The salient features of federalism — decentralization of information and authority and inter-jurisdiction competition — help provide credible commitment for these purposes. In addition, we discuss factors relevant for sustaining federalism.

Keywords:   Federalism, Market incentives, Decentralization, Inter-jurisdiction competition

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