This paper examines a distinctive mechanism of providing incentives to local governments - upgrading counties to cities. In China, awarding city status to existing counties is the dominant way of creating new urban administrative units, during which the local government gets many benefits. Using...

China operated an urbanization policy by which counties could be given city status between 1983 and 1997. The policy had substantial impacts on the new administrative entities, including more discretionary power and fiscal independence. Such "county-to-city upgrading" provided the central...