DP12439 The Rise and Fall of Local Elections in China: Theory and Empirical Evidence on the Autocrat's Trade-off

Author(s): Monica Martinez-Bravo, Gerard PadrĂ³ i Miquel, Nancy Qian, Yan Yao
Publication Date: November 2017
Keyword(s): economic development, Loan pricing; Loan spreads; Democratic institutions; Reversals, political economy
JEL(s): O2, P16, P3
Programme Areas: Development Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12439

We propose a simple informational theory to explain why autocratic regimes introduce local elections. Because citizens have better information on local officials than the distant central government, delegation of authority via local elections improves selection and performance of local officials. However, local officials under elections have no incentive to implement unpopular centrally mandated policies. The model makes several predictions: i) elections pose a trade-off between performance and vertical control; ii) elections improve the selection of officials; and iii) an increase in bureaucratic capacity reduces the desirability of elections for the autocrat. To test (i) and (ii), we collect a large village-level panel dataset from rural China. Consistent with the model, we find that elections improve (weaken) the implementation of popular (unpopular) policies, and improve official selection. We provide a large body of qualitative and descriptive evidence to support (iii). In doing so, we shed light on why the Chinese government has systematically undermined village governments twenty years after they were introduced.