Would a central planner let people starve? The great unsolved puzzle of china's great famine (1958-61)

China's Great Famine killed up to 45 million people. Recent research shows that Chinese leader Mao Zedong is aware that people are starving, but instead of providing famine relief (e.g. grain imports) he orders policies that exacerbate the famine (e.g. grain exports). I ask if Mao has incentives to let people starve: Does famine mortality contribute to his goal of transforming China into an industrial power? Theoretically, I show that famine mortality can increase industrial output in a centrally planned two-sector economy (agriculture and industry) with surplus labor (the marginal product of agricultural labor is zero) and where agricultural savings (e.g. grain exports) are the source of industrial capital (e.g. imports industrial equipment). Intuitively, the annihilation of surplus labor, e.g. through famine, increases agricultural savings by reducing the wage bill without affecting agricultural output. The planner invests these additional savings in the industrial sector (e.g., imports of industrial equipment financed through grain exports). The less-populous economy has thus more industrial capital but fewer industrial labor, and industrial output is higher if the positive effect of the former exceeds the negative effect of the latter. This is plausibly the case when industrialization is in its infancy (the marginal product of industrial capital is high). Novel econometric analysis suggests that the model provides a realistic description of Mao's economy.