Checks And Balances,Credible Commitment And Economis Growth

A country’s economic growth requires a good institution as a guarantee. However, historical experience shows that it is not easy to build a good institution, and there are many difficulties during the transforming from the ineffective institution to the effective institution, of which the greatest resistance is from the ruling elites. Thus, the elites’co-operation is a prerequisite for institutional change. However, the traditional theory of institutional change is based on the assumption that the preferences of the ruling elites are consistent, which ignores the individual differences between the elites, and cannot explain how to reach the cooperation agreement between the elites during the process of institutional change. With regards to this, this paper constructed an interpretation framework of checks and balances, credible commitment between the elites, and economic growth. We believe that rulers will distribute considerable benefits to the elites in order to get their support and cooperation during the institutional change. However, the distribution of benefits will not necessarily lead to institutional change smoothly. To deal with the time delay problem caused by power, the commitment between the rulers and the elites must be credible, which will not hinder the emergence of institutional change. However, whether repeated games, reputation mechanism or the mechanism of competition has its limitations in achieving credible commitment among the elites, and only checks and balances mechanism can truly "make the promise a reality." Therefore, the main conclusion of this study is that checks and balances is the key factor of effective institutional change, which is proved by following Britain and the Soviet Union contrast case.This conclusion is also adapted to China. Among current theories on interpretating China’s development experience, a more mature point is that local government competition is the driving force of China’s rapid economic growth. The competition is posed by two mechanisms, one of which is fiscal decentralization, and the other is political centralization. But local government competition theory also ignored the differences of individual behavior of local government, because it emphasis that the commitment given by Central government to local government is credible in the interaction between central and local, so the two machines will have a strong incentive to local government. However, in fact the differences of local government’s behavior exist both in the vertical and horizontal spatial dimensions, so it is very important to explore the factors affecting the behavior of local government, and to find out the reasons resulting in the differences of local government’s behavior. The empirical verification of this paper is completed by the method of the panel data analysis. The results support the previous conclusion."The central-local" credible commitment is an important factor causing the differences between local government behavior. In the central-local game process, the greater the likelihood of the central keeping its promise is, the more likely local government would be those who support local economic development as the central hopes. The achievement of credible commitment between "central-local" must rely on checks and balances. The study on the case of China National Salt Industry Corporation is to show us the contents of two levels:one is echoed to the foregoing analysis, and demonstrate that credible commitment problem between the state and monopolies also exists, and whether the State can keep its promise will have a direct impact on the behavior choices of China National Salt Industry Corporation. The second level reveals how to achieve commitment among the Chinese elites. The study found that the credible commitment among Chinese elites is completed during the game. Elites believe that they must share more resources and obtain a higher status in order to make leaders to better comply with their commitments, and the implementation of commitments changes with the strength. And the non-institutionalized way greatly restricted the fulfillment of commitments. The specification way is still the checks and balances.