This paper seeks to show how fiscal policy is used in Mainland China to redistribute resources from affluent to poor areas in order to narrow the development gap.
We construct a set of models in translog to illustrate the relationships between national income and public resources (expenditure), taking the provinces as unit of measurement, we collect seventeen sets of cross-section, provincial data for 1979, and estimated provincial national income from the distribution side, by using the OLS method, we estimated the elasticities of each equation and found that (1) ?_(R/P?Y/P)>1 (2) ?_(E/P?Y/P)<1 (3)?_(R/Y?Y/P)>0 (4)?_(E/Y?Y/P)<0. These results confirmed with our original premises.
