Local Elections and Consumption Insurance

27 Pages Posted: 7 Jun 2012

See all articles by Li Gan

Li Gan

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Lixin Colin Xu

World Bank - Development Research Group (DECRG)

Yang Yao

Peking University - China Center for Economic Research (CCER)

Date Written: July 2012

Abstract

During our sample period from 1987 to 2002, Chinese villages completed the transition from government‐appointed village leaders to elected ones. This article examines if and how much democratic elections of the village leaders affected consumption insurance by Chinese village residents. Exploring a panel dataset of 1,400 households from this period, we find that consumption insurance is around 20 percent more complete with elected village leaders. Furthermore, local elections improve consumption insurance only for the poor and middle‐income farmers, but not for the rich. The results are robust when we allow for pretrending, potential endogeneity of elections, and higher measurement errors for rich residents. We also find that the effects on consumption insurance are stronger when closer to the upcoming election year and when the village committees consist largely of non‐Communist Party members. These findings suggest that the election effects on consumption insurance partly come from increasing accountability to local constituents.

Keywords: Consumption insurance, risks, accountability, election, party

JEL Classification: D1, H4, O1

Suggested Citation

Gan, Li and Xu, Lixin Colin and Yao, Yang, Local Elections and Consumption Insurance (July 2012). Economics of Transition, Vol. 20, Issue 3, pp. 521-547, 2012. Available at SSRN: https://ssrn.com/abstract=2079403 or http://dx.doi.org/10.1111/j.1468-0351.2012.00437.x

Li Gan

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lixin Colin Xu

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
MC 3-427
Washington, DC 20433
United States
202-473-4664 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/cxu

Yang Yao

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, 100871
China

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