Political Patronage, Infrastructure, and Economic Growth: Evidence from China

57 Pages Posted: 14 Apr 2020

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: March 18, 2020

Abstract

How does political patronage influence investment in critical infrastructure and economic growth in the long term? With a difference-in-differences design applied to the setting of China, I show that cities whose leaders established patron-client connections with their provincial superiors during 2008-09 were more likely to invest in transportation infrastructure and their state-dominated manufacture sector was more likely to grow. Both findings persist even after the crisis is over, showing that political patronage networks during the financial crisis had a long-term impact on how cities pursue economic growth. By contrast, unconnected cities were more likely to improve the business environment to foster private entrepreneurship and attract investment and accumulated fewer public debts than connected cities. Taken together, although patronage-client connections during the financial crisis boosted infrastructure investment and stimulated the growth of state-owned industrial firms, such connections also stifled private entrepreneurship and accumulated massive government debts in the long term.

Suggested Citation

Lei, Zhenhuan, Political Patronage, Infrastructure, and Economic Growth: Evidence from China (March 18, 2020). 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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