Can Clientelism Subvert Authoritarianism? Evidence from China's Housing Market

26 Pages Posted: 29 Sep 2014

See all articles by Yuhua Wang

Yuhua Wang

Department of Government, Harvard University

Dong Zhang

Lingnan University

Date Written: 2014

Abstract

This article challenges a popular argument in authoritarian politics that informal institutions often undermine formal institutions. We show that the state bureaucracy is able to penetrate layers of connections built by firms that aim at capturing the state and seeking rents from an imperfect market. We test this by compiling and analyzing a large, original, and panel dataset of 150 Chinese listed real estate firms from 2003 to 2012 matched with 90 real estate policies. Event studies show that political connections are largely ineffective in resisting the impact of the policies implemented by high-authority state organizations. Policies enforced by strong state bureaucracies produced a significant cumulative abnormal return of -0.016% around the 5 days of the announcement of the policy. Using hierarchical linear modeling, we find a universal effect of strong state policies on firm values regardless of political connectedness.

Suggested Citation

Wang, Yuhua and Zhang, Dong, Can Clientelism Subvert Authoritarianism? Evidence from China's Housing Market (2014). APSA 2014 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2453289

Yuhua Wang (Contact Author)

Department of Government, Harvard University ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Dong Zhang

Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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