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The political origin of differences in long-term economic prosperity: centralization versus decentralization

Author

Listed:
  • Chen Feng

    (Shanghai University of Finance and Economics)

  • Beibei Shi

    (Northwest University)

  • Ming Xu

    (Chinese Academy of Social Sciences)

Abstract

It is important to understand the political determinants of long-term economic prosperity. In Sichuan Province of China, there historically existed two long-standing political institutions: a centralized system, represented by the prefecture system, and a decentralized system, represented by the Tusi system. This study utilizes a unique historical dataset for 181 counties in Sichuan Province and implements a regression discontinuity design to estimate the impact of different institutions on long-term economic development. The results indicate that the Tusi system significantly suppressed the performance of the local economy and impeded current regional openness and urbanization. By tracing the channels of its persistent effect, we document that the influence of these historical institutions has persisted mainly through the shaping of human capital and state capacity. The Tusi system is not only harmful to cultural communication and local educational progress but also inhibits the government’s capacity and the formation of authoritarianism.

Suggested Citation

  • Chen Feng & Beibei Shi & Ming Xu, 2020. "The political origin of differences in long-term economic prosperity: centralization versus decentralization," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(3), pages 581-639, September.
  • Handle: RePEc:spr:cliomt:v:14:y:2020:i:3:d:10.1007_s11698-020-00203-4
    DOI: 10.1007/s11698-020-00203-4
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    More about this item

    Keywords

    Political institutions; Centralization; Decentralization; TS; Long-term economic prosperity;
    All these keywords.

    JEL classification:

    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • N95 - Economic History - - Regional and Urban History - - - Asia including Middle East
    • 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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