Working Paper: CEPR ID: DP7654
Authors: Chenggang Xu
Abstract: China?s economic reforms have resulted in spectacular growth and poverty reduction. However, China?s institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve "China puzzle" this paper analyses China?s institution - a regionally decentralized authoritarian system. The central government has control over personnel, whereas sub-national governments run the bulk of the economy; and they initiate, negotiate, implement, divert and resist reforms, policies, rules and laws. China?s reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure.
Keywords: Authoritarianism; China; Decentralization; Economic Development; Economic Reform; Federalism; Institution; Political Economics
JEL Codes: D02; D86; E02; E62; G20; G30; H11; H70; K00; O10; O53; P36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| China's regionally decentralized authoritarian regime (P26) | significant economic growth (O49) |
| China's regionally decentralized authoritarian regime (P26) | poverty reduction (I32) |
| central government's control over personnel appointments (D73) | effective implementation of reforms (D78) |
| effective implementation of reforms (D78) | enhanced economic performance (O49) |
| regional competition among subnational governments (H73) | innovation and reform initiatives (O35) |
| regional competition among subnational governments (H73) | dynamic environment for economic experimentation (O00) |
| lack of independent judicial oversight (K40) | challenges to sustainable development (Q01) |
| presence of rent-seeking behavior (D72) | challenges to sustainable development (Q01) |