Density of local cadres and regional economic performance: Evidence from China

• DOI: http://doi.org/10.1111/twec.12792
• Author: Danli Wang,Yixin Yang,Wei Jiang
• Published date: 01 September 2019
• Date: 01 September 2019

ORIGINAL ARTICLE

Density of local cadres and regional economic

performance: Evidence from China

Wei Jiang

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Danli Wang

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Yixin Yang

3

1

School of Business, Shanghai University of International Business and Economics, Shanghai, China

2

Department of Economics and Institute of Regional Industrial Development, School of Business, Shanghai University

of International Business and Economics, Shanghai, China

3

School of Public Affairs, Zhejiang University, Hangzhou, China

KEYWORDS

density of local cadres, economic performance, economic resources, infrastructure expenditure intensity, political connection

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INTRODUCTION

Most of the existing literature on Chinese public governance focuses on how the rotation system

and competition between local governments impact regional economic development (Blanchard &

Shleifer, 2001; Li & Zhou, 2005; Maskin, Qian, & Xu, 2000; Qian & Xu, 1993; Zhou, 2004).

However, few studies analyse whether local cadre density affects regional economic performance .

Local cadre density, which means the percentage of local cadres to the total regional cadres, has

been constrained by the central government, which has used the “rotation system”and the “birth-

place avoidance system”since the West Han dynasty (approximately 140 BC) to weaken local

grassroots connections and to guarantee the central government's stability and unification (Huang,

1998; Li, 1993). Nevertheless, although the rotation system might have a positive political effect,

its economic impact has not yet been empirically analysed.

Local officials' influence on regional economic development is ambiguous. Chinese government

officials rely mainly on networking (Guanxi) to advance their careers, and local officials have

many fewer connections with top leaders than do their rotated brethren (outsiders). Thus, local offi-

cials might have much less incentive to improve regional economic development because of their

bleak career prospects. By contrast, according to Ban (2011), a political elite's love for his home-

town compels him to pay greater attention to economic development in this area, which may

promote its local economic performance.

This paper is among the few to address the effect of local cadre density on regional economic

development. We propose three channels through which local cadres might influence regional econ-

omic development: economic resources, political connection and the reduction in vast economic

resource expenditures on infrastructure construction. First, local cadres have a higher probability of

being connected with local firms and have a greater incentive to support the connected firms' develop -

ment, which might lead to a distorted economic resource distribution and might thus have a negative

impact on regional economic development. Second, local cadres tend not to waste economic

resources on infrastructure construction, which, in most cases, comes in the form of “face‐savin g”or

Received: 28 February 2018

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Revised: 30 October 2018

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Accepted: 2 March 2019

DOI: 10.1111/twec.12792

World Econ. 2019;42:2723–2744. wileyonlinelibrary.com/journal/twec © 2019 John Wiley & Sons Ltd

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“government achievement”projects (Mianzi Gongcheng, Zhengji Gongcheng),

1

and therefore might

promote regional economic development. Third, local cadres care more about regional economic

performance and may be more active in attracting economic resources from upper‐level government.

Endogeneity problems may occur when we consider the correlation between the current local

cadre density and regional economic performance: places with more private entrepreneurs perform

better in private enterprises and in the regional economy, which help the local elite's family mem-

bers to gradually become local cadres and thus results in a high local cadre density.

2

To solve this

endogeneity problem, we employed the local cadre density in 1949, when the Chinese Communist

Party (CCP) assumed power, as an exogenous instrumental variable.

The local cadre density in 1949 was determined by the date when the CCP assumed power (Chen

& Wang, 2018; Li, 2008). Cities that experienced an earlier takeover by the CCP had a lower local

cadre density, as the CCP had enough members who could serve as “southward cadres”(Nanxia

ganbu). The 1949 local cadre density persisted, affecting the current inside cadre density. The local

cadres were in office for a relatively long period, thereby enabling the formation of effective and last-

ing inside cadre political groups, as well as effective and lasting policies. Retired or promoted local

cadre successors usually came from local areas and had close connections with their former superiors.

This situation explains the positive correlation between local cadre density at the beginning of 1949

and current local cadre density. Furthermore, the difference in the dates of takeover of different cities

around the year 1949 was determined by the cities' distance to Yan'an, the terrain ruggedness and the

control of Kuomintang, which are exogenous (Li, 2008).

To empirically estimate our argument, we integrated cross‐sectional prefectural‐level data from

different sources. Eventually, we constructed a dataset including the date of takeover and local

cadre density in 1949, the current local cadre density, and regional economic performance. We

find that cities with a high local official density have a high per capita income. Furthermore, in

terms of the channels through which local cadres positively affect regional economic performance,

we used the 2009 new rural social endowment insurance pilot cities as economic resource attrac-

tions, the ratio of government spending on infrastructure to the total government expenditure as

face‐saving and government achievement projects, and the number of politically connected private

firms (PCF), weighted by the 2011 population and the number of people in that population who

are among the top 1,000 wealthiest people in China, as politically connected firms. The results

show that local cadres help cities gain greater access to economic resources from the central and

provincial governments, which promotes regional economic performance. Nevertheless, local cadre

density has no impact on politically connected firms and infrastructure expenditure intensity.

This study extends our knowledge on the effect of both the rotation system and the birthplace

avoidance system on regional economic performance. China has used both of these systems since

the West Han dynasty (Lv, 2013; Qian, 2001). The two systems effectively weaken the connec-

tions between local grassroots and inside cadres and maintain the central government's stability

and unification (Lv, 2013; Qian, 2001).

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Nevertheless, the economic impact of the rotation system

1

Rotated cadres sometimes promote projects that will enhance their reputation and create promotion opportunities but that

contribute less to regional economic performance. We denote such projects as “face‐saving”or “government achievement”

projects.

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Jin and Liu (1991) postulated that in the late 1990s, local strongmen gradually became local cadres in cities with better

development of township and village enterprises and private enterprises.

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Western countries had not used the rotation system and the birthplace avoidance system in history, which was regarded as a

main cause of the fraction of Western Europe (Qian, 2001). So far there is few empirical evidence comparing the economic

impacts of the two different political systems.

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