Decentralization, Collusion and Coalmine Deaths
40 Pages Posted: 13 Jul 2012 Last revised: 12 Jun 2013
Date Written: June 6, 2012
We propose a political-economics explanation of the high death rates in China's coalmines, where the local government allows the firms to choose dangerous but profitable modes of production when collusion (between the local government and the firms) is feasible. We argue that decentralization makes collusion more likely and that the decentralization impact is further strengthened if transaction costs of collusion are lower. We test the hypothesis by investigating the impact of national decentralization and exploring within-governor variation for identification. We also provide some evidence on the deterrent effect of media exposure on collusion.
Keywords: decentralization, collusion, public bads
JEL Classification: O14, H75, L51
Suggested Citation: Suggested Citation