Trans-provincial Bribery? High Officials Help Out Their Old Hometowns 官员偏爱籍贯地的机制研究

Mysterious action at a distance — how is it that the hometowns of high officials have extraordinarily good economic performance when that official is far away and supposedly not in a position to help out?

I came across this article summary in the August 2019 issue of Walter Kerr’s    free monthly/ sometimes irregular Chinese Academic Journal Digest . Sign up for you own free subscription.

When Provincial Officials are in Office, Hometowns Benefit 

Title: Officials prefer their places of origin (官员偏爱籍贯地的机制研究)
Journal: Economic Research Journal (经济研究)

Authors: Xu Xianxiang, Zhongshan University (徐现祥); Li Shujuan, Zhongshan University (李书娟)
Publication: July 2019

  • Authors Xu and Li evaluated the economic performance of the hometown counties of 203 provincial party secretaries and governors (the most senior officials in a Chinese province) from 1993-2013.
  • During the periods when those senior officials were in office, their places of origin experienced increases in manufacturing capital by 1.5 percent, number of firms entering home county markets increased by 9 percent, immigration increased by 4 percent, and overall economic growth rates were 2 percent greater than other neighboring counties, Xu and Li report.
  • That these officials appeared to drive investment back to their hometown counties is an unexpected phenomenon, the authors note, since the economic performance of an official’s place of origin has no bearing on his/her performance evaluation or career progression. In China, in most cases, senior officials at the provincial-level do not serve or preside over regions that include their hometown, in part, to discourage local preference.

Note: the Chinese Academy of Social Sciences (CASS) publishes the Economics Research Journal.

Chengdu Case Study Supports Chinese Economists’ Article

While I was doing political and economic work at the US Consulate General in Chengdu 2007 – 2012, the Chengdu district of  Longquanyi  龙泉驿区  built a big industrial zone.  Liu Qibao , a native of Susong County, Anhui Province was the Sichuan Province Communist Party Committee Secretary at the time.  My now-deceased friend  Yin Shuping   殷叔平, a well-plugged in writer — darling of the Party as a young true believer Communist poet in the 50s, soon disillusioned and sentenced to the gulags for 20+ years in the Great Leap Forward when he defended his fellow Chengdu poet Liu Shahe told me a story that gives some background to the economists’ story.

Yin Shuping told me that the Longquanyi district of Chengdu where he lived set up a poverty alleviation project in the Anhui Province hometown of the provincial party secretary.  One might imagine that there was not a transparent process for awarding this contract but maybe I am too cynical.

Sichuan Province Party Secretary Liu Qibao would have been one of the top leaders included in the study since his time leading Sichuan is in the time period.  So that would be an example of a provincial leader (indirectly and not at his initiative one imagines) promoting economic growth in his hometown. 

Yin Shuping also told me that the Longquanyi authorities also got the son of then PM Wen Jiabao involved in a highly profitable investment in the Longquanyi development zone. 

Readers of this blog at the Chinese Communist Party’s Central Commission for Discipline Inspection (one never knows) must already know all about this case.  

My Chengdu anecdote could even be a tidbit for the further research the authors propose in their conclusion:

“The findings in this paper are relatively robust, verifying that resource transfer is the mechanism behind the phenomenon of native preference. Of course, our work in this article merely identifies that this capital transfer effect actually exists. More work is needed on at least two other aspects of this phenomenon. The first is to describe systematically this transfer effect for officials. For example, what channels are used to transferring this capital? What kinds of companies are transferring capital?

The other is to identify the factors that influence the size of the resource transfer effect. These issues deserve further study.”

Officials prefer their places of origin (官员偏爱籍贯地的机制研究)
Journal: Economic Research Journal (经济研究) July 2019

In the English language summary to their paper copied below,  the economists note

This paper deepens the empirical analysis of leaders’influence on economic growth. Lu ( 2017) has pointed out that “the correlation between the assessment incentives and economic growth seen in the panel data at the provincial or municipal level does not mean that the whole economic growth benefits from the existing system. In other words,it is entirely possible that the cake of whole economic growth has not increased,but only the highly motivated leaders have allocated more economic growth”. This paper models this idea and provides primary evidence.

  I wonder if further research on this topic would be dangerous or might it might even get sponsored by the Communist Party’s Central Commission for Discipline Inspection?   Or even if Discipline Inspection supported it, might local officials find ways to punish the economists?   When I reported on HIV/AIDS from US Embassy Beijing in the late 1990s there was massive provincial level (especially in Henan) resistance to central government initiatives that embarrassed local officials.  China is much more decentralized than it first appears. A Chinese saying goes “For every measure from above, a counter-measure is devised below” 上有政策,下有对策

Dropping money on the relatives is a common method of bribing officials who want to maintain the appearance of uprightness.  I remember a  long conversation with a Chengdu businessman about that. 

The Secretary Xi Jinping chill affects economists too as we see from the Unirule economics research institute being chained-up and then shutdown. Considering it all, this is probably as straightforward as can be and still get published. Getting into those questions they mention for future study in their conclusions would probably have been a step too far.


English summary appended to article by the Chinese economists

A Study of the Mechanism of Leaders’Regional Favoritism,Based on the Resource Reallocation Perspective

XU Xianxianga and LI Shujuanb

( a: Lingnan College,Sun Yat-sen University; b: Jinan University)

Summary: There is a substantial literature documenting the novel phenomenon of leaders’regional favoritism. This phenomenon is clearly different from the fact that leaders are committed to the economic development of their jurisdiction,and cannot be simply attributed to leaders’ability. It cannot be attributed to political tournaments either,because a leader’s place of origin may be outside his or her jurisdiction,and economic performance outside the leader’s jurisdiction clearly does not contribute to his or her promotion. This paper therefore examines the mechanisms behind this novel phenomenon.

Theoretically,this paper argues that leaders favor their places of origin through resource reallocation,and provides a model for this phenomenon. In this model,the economy involves two regions labeled region I and region J. Each area is divided into n sub-areas,each with the same initial capital and economic activity. There is a unified and competitive capital market,and capital can flow in the economy without cost. Labor cannot flow between sub-regions,and each region inelastically has one unit of labor. Leaders are both concerned with their native area’s development and the development of their jurisdiction,and have the ability to provide certain public services for their native area. Other things being equal,the native area has a larger number of public services,resulting in a higher marginal output of capital. In a unified and competitive capital market,capital in other regions will flow to the native area until the marginal output in the two areas reequalizes.

This kind of resource reallocation will eventually be transformed into a difference in economic performance between the two areas,which leads to the phenomenon of regional favoritism observed in the literature.

In this paper,this mechanism is tested using a sample of provincial leaders. In 1998—2013,there were 203 provincial party committee secretaries and governors in the country. Places of origins were distributed throughout 74 counties outside jurisdictions and 32 counties inside jurisdictions. This paper adopts a sample of native areas outside the jurisdiction of provincial leaders as the treatment group,based on the following four points. First,the provincial leader’s place of origin is exogenous. At the same time,provincial leaders are also exogenous to their places of origin. Second,provincial leaders have the power to influence the economic development of their places of origin. Third,the development of areas outside the jurisdiction has nothing to do with political incentives. Because the leader’s place of origin is not in his or her jurisdiction,its economic development does not directly affect personal career development,which eliminates the political incentive for its improved performance. Fourth,the development of leaders’places of origin can be separated from their capabilities. The capacity of provincial leaders will not change significantly with a change in their position,but their impact on their place of origin may change as their position changes.

Empirically,based on the aggregate firm data from 1998—2013,we find that manufacturing capital flows to places of origin from other regions in the same province. In the leader’s place of origin,manufacturing capital increases by 1. 5%,number of firms goes up by 9%,immigration rate increases by 4%,and emigration decreases by 13%,but the capital scale of firms remains unchanged. We also find that the economic growth of the place of origin is 2% greater. These findings are robust,and they reveal that resource reallocation is a likely mechanism of the phenomenon of regional favoritism.

This paper complements to the political tournament and ability hypothesis. The resource reallocation hypothesis does not emphasize the direct influence of leaders,but emphasizes that leaders’preference for their place of origin will bring about resource reallocation in market competition,thus affecting the place’s economic performance.

This paper deepens the empirical analysis of leaders’influence on economic growth. Lu ( 2017) has pointed out that “the correlation between the assessment incentives and economic growth seen in the panel data at the provincial or municipal level does not mean that the whole economic growth benefits from the existing system. In other words,it is entirely possible that the cake of whole economic growth has not increased,but only the highly motivated leaders have allocated more economic growth”. This paper models this idea and provides primary evidence.

Keywords: Provincial Leader; Resource Reallocation; Regional Favoritism

JEL Classification: O11,P16,P26,R11 ( 责任编辑: 陈小亮) ( 校对: 晓鸥)


徐现祥、李书娟: 官员偏爱籍贯地的机制研究

About 高大伟 David Cowhig

Now retired, translated Liao Yiwu's 2019 "Bullets and Opium", and studying some things. Worked 25 years as a US State Department Foreign Service Officer including ten years at US Embassy Beijing and US Consulate General Chengdu and four years as a China Analyst in the Bureau of Intelligence and Research. Before State I translated Japanese and Chinese scientific and technical books and articles into English freelance for six years. Before that I taught English at Tunghai University in Taiwan for three years. And before that I worked two summers on Norwegian farms, milking cows and feeding chickens.
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