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

• Published date: 01 July 2023
• DOI: http://doi.org/10.1177/00104140221139389
• Author: Zhenhuan Lei
• Date: 01 July 2023
• Subject Matter: Articles

Article

Comparative Political Studies

2023, Vol. 56(8) 1156–1188

© The Author(s) 2022

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DOI: 10.1177/00104140221139389

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The Political Resource

Blessing or Curse?

Patronage Networks,

Infrastructure

Investment, and

Economic Development

in China

Zhenhuan Lei

1,2



Abstract

Does the patron-client connection between local governments and their

superiors improve or hurt the local economic development? Although recent

research suggests that patron-client connections boost local economic

performance, this paper investigates the potential costs and risks of

connection-driven economic development. With a difference-in-differences

design applied to Chinese prefecture-level cities, I f‌ind that politically con-

nected cities were more likely to win their superior’s support to obtain the

projects approved by the four-trillion-Yuan stimulus enacted in 2008 and

increased the city’s public investment in infrastructure. Meanwhile, these

politically connected cities accumulated more public debts than other un-

connected cities. Furthermore, those cities that lacked such political con-

nections were more likely to promote private investment by introducing

1

University of Wisconsin-Madison, Madison, WI, USA

2

China Center for Economic Research, National School of Development, Peking University,

Beijing, China

Corresponding Author:

Zhenhuan Lei, Department of Political Science and La Follete School of Public Affairs,

University of Wisconsin-Madison, 322D North Hall, 1050 Bascom Mall, Madison, WI 53706,

USA.

Email: zhenhuan.lei@wisc.edu

business-friendly policies. These results show that patron-client connections

make an economic development model that features government investment

and public debts more possible than the one that depends on vibrant en-

trepreneurship and private investment.

Keywords

China, corruption and patronage, economic policy, intergovernmental

relations, political economy

Introduction

Economic development and public goods provision are at the center of

comparative political economy research. Local off‌icials are at the frontier of

providing public goods and promoting economic development. They raise the

funding for public goods and design and carry out programs that facilitate

economic development. Meanwhile, recent research shows that sub-national

governments that maintain a close connection with higher level governments

through partisanship (Brollo & Nannicini, 2012;Callen et al., 2020;Rivera,

2020) or active lobbying (Goldstein & You, 2017;Ji & Ma, 2021;Payson,

2020) receive more f‌iscal and policy support from superiors. Hence, political

connections of local governments with their political superiors will enter into

the calculus of regional off‌icials when they formulate plans for local public

goods provision and economic development.

Given the importance of intergovernmental relationship in economic

development, it is natural to ask whether such close political connections

promote or hinder regional economic development. Recent research provides

compelling evidence that close intergovernmental connections positively

correlate with better economic performance because such close connections

enhance the incentives of subordinates to work harder (Jiang, 2018;Toral,

2021) and the protege receives more resources from the patron to implement

economic policies (Asher & Novosad, 2017;Jiang & Zhang, 2020;Li & Lei,

2022). Hence, it seems that political resources of a local government “bless”

the local economic development.

Building on these f‌indings, the purpose of this paper is to further un-

derstand the longer term economic consequences of political patron-client

connections between a local government and its superior. My analysis shows

that underneath the improved economic performance lies the risks that may

undermine the longer term economic development. In other words, while

political patron-client connections may boost economic performance as ex-

isting research suggests, my research directs to the potential costs and risks of

connection-driven economic growth.

Lei 1157

The starting point of my analysis is the local government’s choice of how to

promote investment. Because a major source of economic development is

investment, where investments come from matters. I will argue that a gov-

ernment’s political connections with its superiors profoundly shape local

off‌icials’decision on from whom they solicit the resources for investment

projects. More specif‌ically, those local off‌icials who have such close con-

nections with higher-ups are more likely to receive their support (e.g., f‌iscal

transfers and federal projects). Such support and resources from superiors are

most important for public investment that often requires various bureaucratic

approvals and f‌iscal budgets. Hence, political resources make public in-

vestment in infrastructure or alike more likely.

By contrast, other governments that lack the means to inf‌luence their

superiors are forced to rely on private investors for investment since their

chances of lobbying major public projects are much slimmer than politically

connected governments. Consequently, those governments that do not have

close connections to their higher-ups have stronger incentives to attract

private investment by, for instance, nurturing a more favorable environment

for business investment, upholding the rule of law, and cutting bureaucratic

red tapes.

Hence, political intergovernmental relations make an economic devel-

opment model that features higher public investment (and ensuing public

debts) more possible than the one that depends on vibrant entrepreneurship

and private investment. The divergence of these two economic development

strategies will become even more salient if the economy is hit by an economic

crisis or other external impacts. To react to such crises, governments often

enact stimulus programs that usually contain signif‌icant portions of public

investment. In particular, those severe economic crises often prompt gov-

ernments to adopt a larger size stimulus that can profoundly alter a gov-

ernment’s economic development strategies. For instance, to overcome the

inf‌luence of the Great Depression in the 1930’s, the Franklin D. Roosevelt

administration enacted the “New Deal”and introduced many public projects

that were, at the time, quite controversial and even unthinkable in the United

States.

Turning to the empirical setting of this paper, the Chinese government also

announced a stimulus worth of four trillion Yuan (or $586 billion) in the winter

of 2008 to boost the declining growth rate due to the global f‌inancial crisis in

that year. The primary goal of the program was to stimulate economic growth

through large-scale infrastructure projects. These opportunities for stimulus-

funded public works became a “windfall”that provincial politicians could

distribute to their loyal subordinates. Since China adopts a patronage system

that allows its provincial leaders to appoint subordinates in prefecture-level

cities (“cities”hereafter), my empirical analysis examines whether patron-

client connections between city leaders and their primary superior, provincial

1158 Comparative Political Studies 56(8)