Constitutional Reform, Rent Extraction, and Economic Development in China

Abstract

This paper explores the constitutional political economy and history of economic liberalization in China, with the aim of understanding how and why the policies that produced that growth came to be adopted.

The paper argues that constitutional reforms played important roles in China's economic development and are likely to do so in the future. Changes in the political rules of the game increased the relative influence of urban interests along China's east coast, which indirectly increased support for international trade and the extension of domestic markets. The analysis thus fills an important void in the CPE-based research program on Chinese decentralization, (Qian and Weingast 1997), which does not provide an explanation for the decentralization that helped create elite Chinese support for economic development.

The theory and historical narrative developed is based on the constitutional exchange model of reform ( Congleton 2001, 2011a) and other research on rent extraction (Congleton and Lee 2009, Congleton 20011b).

Keywords: rent extraction, liberalization, public choice, constitutional political economy, corruption

JEL Classification: D7, H1, F10