The Mandarin Model of Growth

No 25296, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: China's economic reforms over the past 40 years have led to a mixed economic structure with the government playing a key role in an increasingly market-driven economy. This paper expands a standard growth model of Barro (1990) to incorporate this structure, with a particular focus on including the agency problem between the central and local governments. To incentivize local governors, the central government has established an economic tournament, which generates not only intended incentives to develop local economies, à la Holmstrolm (1982), but also short-termist behaviors, à la Stein (1989). The latter channel helps to explain a series of challenges that confront the Chinese economy, such as overleverage through shadow banking and unreliable economic statistics.

JEL-codes: E02 G18 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-cna, nep-mac and nep-tra
Note: AP CF DEV EFG IFM
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Citations: View citations in EconPapers (23)

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