The Political Resource Blessing or Curse? Patronage Networks, Infrastructure Investment, and the Varieties of Economic Development Strategies in China

77 Pages Posted: 14 Apr 2020 Last revised: 19 Aug 2021

See all articles by Zhenhuan Lei

Zhenhuan Lei

University of Wisconsin - Madison - La Follette School of Public Affairs; University of Wisconsin - Madison - Department of Political Science

Date Written: August 20, 2021

Abstract

Although all governments desire higher economic growth, they adopt different strategies to promote economic growth. Conventional wisdom holds that the endowments of economic resources determine the economic development model that best utilizes the local comparative advantage. This paper explores how governments' political resources influence their economic development strategies. With a difference-in-differences design applied to Chinese prefecture-level cities, I find that politically connected cities are more likely to obtain their superior's support to increase public investment in infrastructure. Moreover, politically connected cities also accumulate more public debts that may undermine the sustainability of their long-term economic growth. By contrast, other cities that lack such political connections are more likely to promote private investment by improving the pro-business environment. These results show that political resources make an economic model that features government investment and public debts more possible than the one that depends on vibrant entrepreneurship and private investment.

Keywords: China, economic development, financial crisis, infrastructure, patronage

Suggested Citation

Lei, Zhenhuan, The Political Resource Blessing or Curse? Patronage Networks, Infrastructure Investment, and the Varieties of Economic Development Strategies in China (August 20, 2021). Available at SSRN: https://ssrn.com/abstract=3556948 or http://dx.doi.org/10.2139/ssrn.3556948

Zhenhuan Lei (Contact Author)

University of Wisconsin - Madison - La Follette School of Public Affairs ( email )

1225 Observatory Drive
Madison, WI 53705
United States

University of Wisconsin - Madison - Department of Political Science ( email )

Madison, WI
United States

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