The Mandarin Model of Growth

45 Pages Posted: 26 Nov 2018

See all articles by Wei Xiong

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2018

Abstract

China's economic reforms over the past 40 years have led to a mixed economic structure with the government playing a key role in an increasingly market-driven economy. This paper expands a standard growth model of Barro (1990) to incorporate this structure, with a particular focus on including the agency problem between the central and local governments. To incentivize local governors, the central government has established an economic tournament, which generates not only intended incentives to develop local economies, à la Holmstrolm (1982), but also short-termist behaviors, à la Stein (1989). The latter channel helps to explain a series of challenges that confront the Chinese economy, such as overleverage through shadow banking and unreliable economic statistics.

Suggested Citation

Xiong, Wei, The Mandarin Model of Growth (November 2018). NBER Working Paper No. w25296, Available at SSRN: https://ssrn.com/abstract=3290431

Wei Xiong (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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