Subnational leaders and economic growth: evidence from Chinese cities

Abstract

This paper studies the role of subnational leaders in economic growth using a unique city-leader linked dataset of Chinese cities for the period 1994–2010. A unique feature of China’s institutional setups is that local leaders are often moved from one locality to another. This feature allows us to compare leaders across cities. Adopting the decomposition method previously applied to linked employer–employee data, we find that leaders have significantly different levels of abilities to promote local economic growth. We also study how leaders’ personal abilities affect their chances of promotion. We find that personal abilities become more important as a leader gets older, and this effect is most pronounced around the median age in the sample. Those results remain robust when we conduct full-information maximum-likelihood estimation of a system of equations consisting of both the growth and the promotion equations.