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Article: Decentralization, agency costs, and the new economic constitution of China

TitleDecentralization, agency costs, and the new economic constitution of China
Authors
KeywordsAdministrative monopoly
Issue Date2011
Citation
Constitutional Political Economy, 2011, v. 22, n. 4, p. 355-372 How to Cite?
AbstractThis article examines the evolution of the rules that govern central-local government relations in the Chinese political economy. Although the federalism that accompanied China's market reforms has substantially facilitated economic growth, it has also created powerful incentives for local authorities to abuse their powers, significantly increasing the agency costs to the central government of maintaining political stability and creating a national market. This article analyzes the institutional design of the nascent Anti-Monopoly Law (AML), known to officials and academics as China's new "Economic Constitution". It demonstrates that the major purpose of the AML is to break up the so-called "administrative monopolies", or bureaucratic fiefdoms over local economies. In contrast to existing academic treatment, it will study the AML in the framework of competition for influence over economic policy between rent-seeking central and local actors. It argues that the AML, despite its stated purposes, is indeed designed to reduce the policy-making powers of the regions to the comparative advantage of the central government. The AML can thus be modeled as a new constitutional contract that the center wishes to enter into with the localities in order to repeal the existing rules of decentralization. It will be further shown that the AML, reflecting the allocation of power in the Chinese state, prioritizes the political imperatives of recentralization over the facilitation of competitive markets. © 2011 Springer Science + Business Media, LLC.
Persistent Identifierhttp://hdl.handle.net/10722/228128
ISSN
2015 SCImago Journal Rankings: 0.411

 

DC FieldValueLanguage
dc.contributor.authorIp, Eric C.-
dc.contributor.authorLaw, Michael K H-
dc.date.accessioned2016-08-01T06:45:15Z-
dc.date.available2016-08-01T06:45:15Z-
dc.date.issued2011-
dc.identifier.citationConstitutional Political Economy, 2011, v. 22, n. 4, p. 355-372-
dc.identifier.issn1043-4062-
dc.identifier.urihttp://hdl.handle.net/10722/228128-
dc.description.abstractThis article examines the evolution of the rules that govern central-local government relations in the Chinese political economy. Although the federalism that accompanied China's market reforms has substantially facilitated economic growth, it has also created powerful incentives for local authorities to abuse their powers, significantly increasing the agency costs to the central government of maintaining political stability and creating a national market. This article analyzes the institutional design of the nascent Anti-Monopoly Law (AML), known to officials and academics as China's new "Economic Constitution". It demonstrates that the major purpose of the AML is to break up the so-called "administrative monopolies", or bureaucratic fiefdoms over local economies. In contrast to existing academic treatment, it will study the AML in the framework of competition for influence over economic policy between rent-seeking central and local actors. It argues that the AML, despite its stated purposes, is indeed designed to reduce the policy-making powers of the regions to the comparative advantage of the central government. The AML can thus be modeled as a new constitutional contract that the center wishes to enter into with the localities in order to repeal the existing rules of decentralization. It will be further shown that the AML, reflecting the allocation of power in the Chinese state, prioritizes the political imperatives of recentralization over the facilitation of competitive markets. © 2011 Springer Science + Business Media, LLC.-
dc.languageeng-
dc.relation.ispartofConstitutional Political Economy-
dc.subjectAdministrative monopoly-
dc.titleDecentralization, agency costs, and the new economic constitution of China-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s10602-011-9110-3-
dc.identifier.scopuseid_2-s2.0-80255133168-
dc.identifier.volume22-
dc.identifier.issue4-
dc.identifier.spage355-
dc.identifier.epage372-

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