Collusion, local governments and development in China : a reflection on the China model

257 Pages·2017·4.257 MB·English

by  Nie, Huihua

Huihua Nie
Collusion, Local Governments
and Development in China
A Reflection on the China Model
Translated by
Haifeng Li and Ping Chen
Collusion, Local Governments and Development
in China
Huihua Nie
Collusion, Local
Governments and
Development in China
A Reflection on the China Model
Huihua Nie
Renmin University of China
Beijing, China
Translated by Haifeng Li and Ping Chen
ISBN 978-981-10-5058-9 ISBN 978-981-10-5059-6 (eBook)
DOI 10.1007/978-981-10-5059-6
Library of Congress Control Number: 2017945790
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To Those Concerned About Destiny of China
and Promoting China’s Progress
A
cknowledgements
I avail myself of this opportunity to express my heartfelt gratitude
for the invaluable support that I have received over the past 3 years
(2009–2012), during which I spent every day scrambling up the moun-
tains of my academic research. I must first mention the China Scholarship
Council (CSC) which gave me financial support for my one-year postdoc-
toral research at Harvard University with Oliver Hart, who, as an inter-
nationally luminary economist in contract theory and the theory of the
firm, benefited me a lot both in my academic research and teaching.
A number of people have been wonderfully helpful in providing mate-
rial and research approach for the book. I would very much like to thank
Ruixue Jia, Minjie Jiang, Ting Jiang, Jinbo Li, Xianghong Wang, Rudai
Yang, Yu Zhang, Yuxiao Zhang, and Zhaoyun Zou, with whom I collab-
orated well and successively published a series of papers on the topic of
collusion and the China model in Economic and Political Studies, Journal
of Comparative Economics, Economic Research Journal, The Journal
of World Economy, Review of Economics and Statistics, etc. Many of the
papers inspired and enlightened me throughout the journey of complet-
ing this book.
I also give my thanks to my students Li Dang, Zhibo Tang and Hua
Guo for their arduous and down-to-earth assistant research for me.
My thanks would also go to Center for Firm and Organization Studies
(CFOS) of Renmin University of China, which gave me a lot of help
vii
viii ACkNOWLEDGEMENTS
through Young’s Workshop and CFOS’s seminars. I would also like to
thank my doctoral tutor Prof. Ruilong Yang, who has given me many
constructive suggestions for my research on this project and due concern
to my academic career development. I would also be indebted to aca-
demic colleagues, Prof. Naiwu Hu, Prof. Ye’an Zhou and Prof. Qijing
Yang for their support and guidance.
Finally, I would like to thank my friends and colleagues who work in
the political community and enterprises for their first-hand materials and
my family for their patience, encouragement and constant support.
c
ontents
Part I An Anatomy of the China Model from the Perspective
of Collusion
1 Introduction 3
1.1 The China Model 3
1.2 Cost of Economic Growth 8
1.3 Main Arguments 10
1.4 key Concepts 16
1.5 The Structure of This Book 19
Notes 20
References 22
2 Government–Firm Collusion: A New Analytical
Framework 23
2.1 Three PX Projects 23
2.1.1 Dalian XP Project: Relocation and
Expansion 24
2.1.2 Xiamen’s PX Project: Relocation 25
2.1.3 Ningbo’s PX Project: Abortion 26
2.2 The China Model Driven by Government–Firm
Collusion 26
ix
x CONTENTS
2.3 Government–Firm Collusion Model 30
2.3.1 Game Players 30
2.3.2 Information Structure 31
2.3.3 Utility Function 32
2.3.4 Time Line 33
2.4 The Optimal Equilibrium Collusion
and Collusion-Proof Contract 34
2.4.1 Equilibrium Collusion 34
2.4.2 Collusion-Proof Contract 35
2.4.3 Allowing Collusion Versus Deterring
Collusion 39
2.4.4 The Role of Compensation 40
2.5 A Case Study 42
2.6 Extended Discussions 44
2.6.1 The Local Government’s Lack of Long-Term
Expectation 44
2.6.2 Imposition of Exorbitant Taxation on the
Firm 44
2.6.3 Ineffectiveness of Supervision of the Mass
Media 45
2.6.4 Lack of Credibility of Punishment 45
2.7 Summary 46
Notes 47
References 50
3 Collusion and Coalmine Accidents 55
3.1 High Frequency of Coalmine Accidents 55
3.2 The Evolution of China’s Coalmine Safety Supervision
System 59
3.3 Testing Approaches to Government-Firm Collusion 60
3.4 Results of Econometric Analysis 63
3.4.1 Sources of Data 63
3.4.2 Data Description 64
3.4.3 Main Results 65
3.5 Robustness Test 69
3.5.1 More Control Variables 69
3.5.2 A More Rigorous Test 71
CONTENTS xi
3.6 Summary 72
Notes 72
References 74
4 Collusion and House Prices 77
4.1 An Overview of Exorbitant House Prices in China 77
4.2 Three Different Views About Exorbitant HousePrices 81
4.3 The Institutional Background of Housing Market
Control 84
4.3.1 Fiscal Decentralization Between the Central
Government and Local Governments 84
4.3.2 Housing and Land Reform 85
4.4 High House Prices Driven up by Collusion 87
4.5 Results of Econometric Tests 94
4.5.1 Model Specification 94
4.5.2 Data Description 96
4.5.3 An Analysis of Regression Results of Housing
Variables 96
4.5.4 Robustness Test 99
4.6 Summary 101
Notes 101
References 103
5 Pollution, Illegal Land Use, and Other Major Social
Problems 107
5.1 Environment Pollution 107
5.1.1 An Overview of Pollution in China 107
5.1.2 Collusion and Pollution 109
5.2 Illegal Use of Land 110
5.3 Local Negative Externalities 113
5.4 Smuggling 115
5.5 Food Safety 117
5.6 Other Major Problems 118
5.7 Summary 119
Notes 120
References 121