Helping and grabbing hand behavior can be used to describe behavior of government in transition economies. In both cases there is corruption, but of different types and with different consequences for economic development. With the helping hand, corruption is organized, and government assists development. With the grabbing hand, corruption is more individualistic and disorganized, and government
... [Show full abstract] impedes development. The grabbing hand has been described as present in Russia and other former socialist European countries, whereas behavior of local government officials in China has previously been described as helping hand. In this paper we study a fiscal re-centralization that occurred in China in the mid-1990s. We set out to examine the interaction between central and local government in which the center chooses the division of budgetary tax revenues, and local government chooses between a helping and grabbing hand. Our empirical estimates indicate that the center did benefit from the fiscal centralization, but at the expense of local government. Moreover, budgetary revenue and economic growth declined because of the change from helping to grabbing hand behavior by local government.