Political Patronage, Infrastructure, and Economic Growth: Evidence from China

Abstract

Although all governments desire higher economic growth, they adopt different strategies to promote economic growth. Conventional wisdom holds that the endowments of economic resources determine the economic development model that best utilizes the local comparative advantage. This paper explores how governments' political resources influence their economic development strategies. With a difference-in-differences design applied to Chinese prefecture-level cities, I find that politically connected cities are more likely to obtain their superior's support to increase public investment in infrastructure. Moreover, politically connected cities also accumulate more public debts that may undermine the sustainability of their long-term economic growth. By contrast, other cities that lack such political connections are more likely to promote private investment by improving the pro-business environment. These results show that political resources make an economic model that features government investment and public debts more possible than the one that depends on vibrant entrepreneurship and private investment.