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Crony capitalism, the party-state, and the political boundaries of corruption

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Listed:
  • Li, Weijia
  • Roland, Gérard
  • Xie, Yang

Abstract

We build a model that puts together crony capitalism, the hierarchy of the Chinese communist party-state, and the decision-making process inside the Party Center. We show that inefficient economic institutions create local corruption that raises realized productivity, while generating rents that flow along the party-state hierarchy up to the provincial level, threatening the Center’s control in potential crises. Although both stronger crisis control and higher economic performance help the Center’s goal to stay in power, we show that given a general fat-tailed risk of crisis, the Center will maximize crisis control at the expense of the economy when choosing its tolerance of local corruption. Power structure and corruption within the Center and reciprocal accountability between central and provincial leaders are also analyzed. Our analysis suggests conditions under which China’s communist regime will or will not deal with the existential threat presented by corruption.

Suggested Citation

  • Li, Weijia & Roland, Gérard & Xie, Yang, 2022. "Crony capitalism, the party-state, and the political boundaries of corruption," Journal of Comparative Economics, Elsevier, vol. 50(3), pages 652-667.
  • Handle: RePEc:eee:jcecon:v:50:y:2022:i:3:p:652-667
    DOI: 10.1016/j.jce.2022.02.002
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    More about this item

    Keywords

    Autocracy; Corruption control; State apparatus; Reciprocal accountability; Chinese Communist Party;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • P30 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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