Local Political Chief Turnover and Economic Growth: Evidence from China

Abstract

It is widely believed that the rotation and promotion system of local political chiefs plays an important role in China’s economic miracle. In this paper, however, we focus on the potential cost of the inherent frequent turnovers of local chiefs. Based on a new manually-collected dataset on prefectural-level local chiefs between 1983 and 2012, our empirical results suggest that Chinese Communist Party (CCP) chief turnover would lead to a 0.35 percentage points decrease of local GDP growth rate in the current year, and 0.23 percentage points decrease in the following year. This effect especially concentrates on government-controlled fields, such as investment, fiscal revenue and expenditure. We also provide evidences that the organization friction, especially the successor CCP chiefs’ unfamiliarity with the city and the colleagues, is a major reason of such negative turnover effect.

Keywords: Local Official Turnover, Economic Growth, Organization Friction, China

JEL Classification: J63, O43, R50