Working Paper: NBER ID: w26652
Authors: Ying Bai; Ruixue Jia
Abstract: We argue that China, with its long history, a relatively stable political system, and multiple regime changes, provides us an opportunity to investigate the political economy of administrative hierarchy. Using prefecture-level panel data and exploiting regime changes during AD1000-2000, we find that gaining and losing importance in the political hierarchy led to the rise and decline of different prefectures (measured by population density and urbanization). Moreover, political hierarchy shapes regional development via both political and market channels (reflected by public employment and transportation networks). More broadly, our study serves as new evidence on how politics shapes economic geography and offers a context to understand changes in economic activity location in the long run.
Keywords: Political Hierarchy; Economic Development; China
JEL Codes: H11; N95; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Political hierarchy (D73) | Public employment (J45) |
| Political hierarchy (D73) | Transportation networks (L91) |
| Political hierarchy (D73) | Regional development (R11) |
| Gaining capital status (F21) | Increase in population density (J11) |
| Losing capital status (F32) | Decrease in population density (J11) |
| Gaining capital status (F21) | Increase in urbanization (R11) |
| Losing capital status (F32) | Decrease in urbanization (R11) |