Accountability and Growth: The Costs of Village Democracy in China

This study uses a unique survey to study the impact of electoral reforms on income growth in
rural China during the past two decades. Electoral reforms shifted the accountability of village
leaders from higher level government towards villagers. We …find that this shift in accountability
reduced income growth and inequality across villagers. Interestingly, we …nd no effect of electoral
reforms on redistribution. Rather, the reduction in inequality is the outcome of the reduction
in growth and the fact growth is biased towards the rich. We provide a simple model to show
that in an environment where higher levels of government focused on income growth, electoral
reforms can reduce growth by shifting the leader’s effort from economic growth to public goods
provision; or by reducing the incentives of the leader because villagers perceptions of overall
leader performance might be subject to shocks. Our empirical results suggest that both channels
may be present. While we fi…nd an improvement in some social outcomes such as a lower number
of disputes and a reduction in village personnel, such improvements are small.

Project ID
Monica Martinez-Bravo