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Political incentives local economic development in China

This project aimed to create a better understanding of what drives decisions at the local level in a decentralized autocracy such as China. The project was linked to a central issue in political economy, namely how the incentive structures resulting from a country's political system affect economic and social development. As important policy issues are often delegated to the local level, more and more studies of incentives focus on local decision-makers. The purpose of this research project was to study incentives for local policymakers in autocratic China.

Project manager
Project participants
Johanna Rickne, SOFI, Stockholms universitet

While previous studies on this issue have focused on growth, the focus of our project was instead on the development of local labour markets and politicians' priorities of different types of public spending. The project mainly dealed with two research issues. The first question focused on how investment in education at the local level depends on the cyclical process of promotions within the party state. 

The second question focused on how both local decision-makers' incentives and general requirements for social welfare affect access to capital in China. Here we analysed how Chinese companies gain access to capital through listings. Listing in China is a strictly regulated process in which decisions on which companies should be allowed to go public are mainly made at the local level. Local politicians thus have the opportunity to direct capital to companies of their preference. 

Our basic hypothesis in this subproject was that companies that contribute more to the local labour market are given priority to raising capital through listing.