Blessing or bane: The absence of a leader, political selection, and economic growth

Abstract

In this study, we explore economic consequences of the absence of a political leader utilizing China's political system characterized by interlocked movements of personnel and a sophisticated procedure of selection and appointment before a local leader takes office. Using data during 2009–2018, we find that the absence of a leader weakens economic growth during the absence period, but local economic growth is stronger during the new leader's tenure. We propose two potential mechanisms, compensation effect and selection effect, and find evidence supporting the latter. These results imply that political selection process is worthwhile even if it harms the economy in the short run.