Working Paper: CEPR ID: DP13505
Authors: Andrés Rodríguez-Pose; Min Zhang
Abstract: Economic growth in China in recent decades has largely rested on the dynamism of its cities. High economic growth has coincided with measures aimed at improving the efficiency of local governments and with a mounting political drive to curb corruption. Yet the connection between government institutions and urban growth in China remains poorly understood. This paper is the first to look into the connection between government efficiency and corruption, on the one hand, and urban growth in China, on the other and to assess what is the role of institutions relative to more traditional factors for economic growth in Chinese cities. Using panel data for 283 cities over the period between 2003 and 2014, the results show that urban growth in China is a consequence of a combination of favourable human capital, innovation, density, local conditions, foreign direct investment (FDI), and, city-level government institutions. Both government quality - especially for those cities with the best governments - and the fight against corruption at the city level have a direct effect on urban growth. Measures to tackle corruption at the provincial level matter in a more indirect way, by raising or lowering the returns of other growth-inducing factors.
Keywords: economic growth; cities; government efficiency; corruption; china
JEL Codes: O43; R11; R58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government efficiency (H11) | urban growth (R11) |
| fight against corruption (H57) | urban growth (R11) |
| provincial-level corruption (H57) | returns on growth factors (O40) |
| returns on growth factors (O40) | urban growth (R11) |
| government efficiency (H11) | urban growth (in high-quality governance cities) (R11) |