Making Reform Work: Evidence from A Quasi-Natural Experiment in Rural China

Abstract

Why are some reforms successfully adopted while others not? This paper addresses this question by exploiting the variation in the adoption of China’s “One-Issue-One-Meeting” reform. The reform initiated by the central government in 2000 encourages rural villages to voluntarily adopt a new governing procedure that can help to enhance local public goods provision. We explore the determinants of adoption by paying particular attention to heterogeneities in village characteristics. Using data from the 2005 China General Social Survey, we find that villages with a more homogenous population measured by lineage fractionalization and a higher average household income are more likely to participate in the reform program. Applying Generalized Spatial Two Stage Least Square estimation, we also discover a spatial spillover in the adoption of the reform: the chance of a village undertaking the reform increases when its neighboring villages also do so, and such effect is more pronounced if the neighboring village is economically better off, suggesting a potential learning mechanism underlying the neighborhood spillover.