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Politics, Growth and Inequality in Rural China: Does It Pay To Join the Party?

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  • Jonathan Morduch
  • Terry Sicular

Abstract

Economic reform is difficult to carry out because it often undercuts the status and economic advantage of the rank-and-file officials to whom authorities must turn to implement market-based changes. Drawing on new longitudinal data collected between 1991 and 1994 in a representative rural county in Northern China, we demonstrate that local officials have not in fact lost out. To the contrary, their incomes have risen and political rents have increased during a period when reforms accelerated. The data suggest that political rents have stemmed largely from control over and access to new wage jobs and collective land that allows high-value agricultural production. The benefits to joining the Communist Party are largely indirect and occur through increasing the probability of becoming an official with such access. This access functions as an implicit performance-based incentive contract that ties the household incomes of officials to increases in consumer demand and the provision of public goods. Political rents are for now tolerated by a population that is sharing fairly equitably in the fruits of growth, allowing implementation of this "win-win" reform process.

Suggested Citation

  • Jonathan Morduch & Terry Sicular, 1998. "Politics, Growth and Inequality in Rural China: Does It Pay To Join the Party?," Harvard Institute of Economic Research Working Papers 1832, Harvard - Institute of Economic Research.
  • Handle: RePEc:fth:harver:1832
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    References listed on IDEAS

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    2. Jiahua Che & Yingyi Qian, "undated". "Insecure Property Rights and Government Ownership of Firms," Working Papers 97050, Stanford University, Department of Economics.
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    Cited by:

    1. Yang, Dennis Tao, 2005. "Determinants of schooling returns during transition: Evidence from Chinese cities," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 244-264, June.
    2. Zhang, Jian & Giles, John & Rozelle, Scott, 2012. "Does it pay to be a cadre? Estimating the returns to being a local official in rural China," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 337-356.
    3. Wu, Alfred M. & Ramesh, M., 2014. "Poverty Reduction in Urban China: The Impact of Cash Transfers," MPRA Paper 54358, University Library of Munich, Germany.
    4. de Brauw, Alan & Giles, John, 2008. "Migrant labor markets and the welfare of rural households in the developing world : evidence from China," Policy Research Working Paper Series 4585, The World Bank.
    5. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
    6. Dwayne Benjamin & Loren Brandt & Paul Glewwe & Li Guo, 2000. "Markets, Human Capital, and Inequality: Evidence from Rural China," William Davidson Institute Working Papers Series 298, William Davidson Institute at the University of Michigan.
    7. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2005. "Why Do Entrepreneurs Enter Politics?," Discussion Papers 00009, Chinese University of Hong Kong, Department of Economics.
    8. Terry Sicular & Yue Ximing & Björn Gustafsson & Li Shi, 2007. "The Urban-Rural Income Gap And Inequality In China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(1), pages 93-126, March.
    9. Xin Meng, 2004. "Economic Restructuring and Income Inequality in Urban China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(3), pages 357-379, September.
    10. repec:bla:etrans:v:25:y:2017:i:4:p:575-591 is not listed on IDEAS
    11. Lu, Jiangyong & Tao, Zhigang, 2010. "Determinants of entrepreneurial activities in China," Journal of Business Venturing, Elsevier, vol. 25(3), pages 261-273, May.
    12. Appleton, Simon & Song, Lina, 2008. "Life Satisfaction in Urban China: Components and Determinants," World Development, Elsevier, vol. 36(11), pages 2325-2340, November.
    13. Jin, Yanhong & Fan, Maoyong & Cheng, Mingwang & Shi, Qinghua, 2014. "The economic gains of cadre status in rural China: Investigating effects and mechanisms," China Economic Review, Elsevier, vol. 31(C), pages 185-200.
    14. Xin Meng, 2007. "Wealth Accumulation and Distribution in Urban China," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 761-791.
    15. Deininger, Klaus & Jin, Songqing, 2009. "Securing property rights in transition: Lessons from implementation of China's rural land contracting law," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 22-38, May.
    16. ROZELLE, Scott & SWINNEN, Johan F.M., 2009. "Why did the communist party reform in China, but not in the Soviet Union? The political economy of agricultural transition," China Economic Review, Elsevier, vol. 20(2), pages 275-287, June.
    17. Zhou, Wubiao, 2009. "Bank Financing in China's Private Sector: The Payoffs of Political Capital," World Development, Elsevier, vol. 37(4), pages 787-799, April.
    18. Ferrero, Mario, 2001. "Political exchange in mass party regimes and the transition from socialism," Economic Systems, Elsevier, vol. 25(4), pages 365-379, December.
    19. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2006. "Why Do Entrepreneurs Enter Politics? Evidence from China," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 559-578, July.
    20. Zhang Qi & Liu Mingxing, 2010. "Local Political Elite, Partial Reform Symptoms, and the Business and Market Environment in Rural China," Business and Politics, De Gruyter, vol. 12(1), pages 1-41, April.
    21. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January.
    22. Luo, Renfu & Zhang, Linxiu & Huang, Jikun & Rozelle, Scott, 2007. "Elections, fiscal reform and public goods provision in rural China," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 583-611, September.
    23. Li, Hongbin & Meng, Lingsheng & Shi, Xinzheng & Wu, Binzhen, 2012. "Does having a cadre parent pay? Evidence from the first job offers of Chinese college graduates," Journal of Development Economics, Elsevier, vol. 99(2), pages 513-520.
    24. Ming Lu & Jianzhi Zhao, 2009. "The Contribution of Social Networks to Income Inequality in Rural China: A Regression-Based Decomposition and Cross-Regional Comparison," Global COE Hi-Stat Discussion Paper Series gd08-019, Institute of Economic Research, Hitotsubashi University.

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