State Capacity and Economic Productivity: Evidence from China, 1949-1987

• In Event: Bureaucrats and Business in Communist and Post-Communist Countries

Abstract

The relationship between state capacity and economic productivity is much debated. Some argue that they have a strong positive relationship between them, while others contend that a less intrusive state improves economic outcomes. Using an original county-level data set covering nearly four decades of PRC history, 1949-1987, our analysis reveals a strong positive correlation between local state capacity and agricultural productivity – especially during the Mao era. Based on the literature, we hypothesize that three underlying determinants of state capacity – the number of local cadres, their education levels, and women’s political empowerment – have been key drivers of productivity growth since the founding of the PRC. Specifically, we have developed three causal hypotheses. First, when a high proportion of local officials were Communist Party members we postulate that their heightened political loyalty made them more inclined to implement policy in a coherent fashion, thus enhancing the cohesion and capacity of local governance. This correlation is likely to be stronger during People’s Commune period, when political and economic leadership were nearly synonymous. Second, when local county-level cadres are better educated we presume this enhanced human capital will increase their efficiency and mobilization capacity. Third, an increased percentage of female party members, which we use as a proxy for women’s political empowerment, will bring new ideas and perspectives into the party and thus enhance its governance capacity. To understand their salience under changing political conditions, we trace these three mechanisms effects across three distinct periods: land redistribution and collectivization (1949-1957), the People’s Commune (1958-1983) and the Reform era (1984-87).

Authors

• Joshua Eisenman, University of Notre Dame

• Wenhui Yang, University of Texas at Austin