The Political Cost of Economic Reforms: Evidence from Privatization in China

• In Event: Backlash and Blame: Political Costs and Consequences

Abstract

Do pro-market economic reforms affect citizens' political attitudes in developing countries, and if so, how? In this article, I conduct a case study on China's privatization reform and construct an original data set to measure county-level privatization of state-owned enterprises(SOEs). Using a cohort difference-in-difference (DID) design, I find that individuals in counties exposed to intenser privatization are less trusting of national and local political leaders and more critical of China's political system. Additional analysis controlling for current social-economic status shows that one decade after the initiation of large-scale privatization, the anti-regime attitudes are still strong, arguing against the transition-related hardship explanations in previous research, and suggesting embedded corruption explanations more plausible. My findings highlight the political cost when conducting reforms, albeit successful, in weakly institutionalized environments.

Author

• Xingchen Lan, Stanford University