East Asia Workshop: Politics, Economy and Society

May 3 Workshop


Workshop on East Asia:
Politics, Economy and Society Presents

“Invest for Advancement: Political Incentives and Investment Growth in Post-Reform China”

Xin Sun
Doctoral Student, Department of Political, Northwestern University
4:30-5:50pm, Tuesday
May 3, 2011
Pick Lounge
5828 South University Ave.

Workshop website: http://cas.uchicago.edu/workshops/eastasia/
Student coordinator: Jean Lin (jeanlin@uchicago.edu)
Faculty sponsors: Dali Yang and Dingxin Zhao
The workshop is sponsored by the Center for East Asian Studies and the Council on Advanced Studies in Humanities and Social Sciences. Persons with disabilities who believe they may need assistance, please contact the student coordinator in advance.

The post-reform era of China has witnessed an unprecedented growth of investment in the economy. This paper provides a political explanation to this phenomenon with a focus on local officials’ incentive to obtain advancement in the party hierarchy. We argue that, compared with those who have little chance of being promoted to higher positions, officials with more promising political future tend to more actively pursue local investment projects. Moreover, advancement-induced investment behaviors are moderated by 1) the degree of local fiscal autonomy and 2) the importance of non-economic policy imperatives facing the local government. Utilizing a panel data covering 28 Chinese provinces during the period of 1992-2008, this paper conducts a systematic empirical analysis to test these theoretical arguments. One implication of these findings is that the political competition among local officials may motivate the latter to spend fiscal and other public resources on the construction of various kinds of investment projects, rather than to improve the quality of local governance and to provide a friendly business environment as previous studies tend to claim.

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