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Public investment as downward benefit distribution: Theory and evidence from China’s public–private partnership programs

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  • Li, Daniel Z.
  • Li, Zeren
  • Zhang, Qi

Abstract

Although previous studies have documented the political cycle of public investment in various countries, we still know little about its distributional consequences. We address this question by analyzing an emerging form of public infrastructure investment in China: public–private partnership (PPP). We argue that mayors use infrastructure investment to distribute benefits, thereby securing local compliance and support. Our empirical analysis draws on a unique dataset that matches PPP contracts with Chinese mayors who served from 2010 to 2017. We demonstrate a salient tenure effect: mayors decrease public investment over time during their tenure. Moreover, the tenure effect is more salient among mayors who lack local work experience. Contract-level evidence shows that mayors disproportionately allocate more investment to local firms, especially local state-owned enterprises, to garner local support. We show that the downward tenure effect is mainly driven by officials’ survival concerns rather than promotion incentives.

Suggested Citation

  • Li, Daniel Z. & Li, Zeren & Zhang, Qi, 2023. "Public investment as downward benefit distribution: Theory and evidence from China’s public–private partnership programs," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 103-128.
    • Handle: RePEc:eee:jeborg:v:211:y:2023:i:c:p:103-128
    DOI: 10.1016/j.jebo.2023.03.025
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    More about this item

    Keywords

    Public–private partnership; Tenure effect; Downward benefit distribution; China;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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