“Laboratory nationalism”: Policy innovation in China

The central government and local governments in China constitute “laboratory nationalism”, which is different from “laboratory federalism”. As a planner, the central government first organizes small-scale policy trials, then imitates the successful policies on a larger scale. To illustrate the process, we take the gradual regional opening as a typical case, then develop a two-stage “trial-extension” game model incorporating the central government and two local governments. Laboratory nationalism's domination depends on actions of the central government at two stages: (1) offering proper incentives to the eligible district at the beginning; (2) in the end unifying local policies to the one which has proven to be successful. We demonstrate that under certain conditions, laboratory nationalism can improve on decentralized outcome.