Voice And Political Accountability: Evidence From China

The transition of China economy has puzzled the world with great economic growth and unbalanced development. Dencentralization and the regional competition have been emphasized by theories such as the market-preserving fiscal federalism and political promotion tournament, which have been the benchmark model to explain the China puzzle. Industry can bring employment and make the government performance looks better, so the local leader who is in charge of many resources will make measures to attract the capital to locate in their jurisdiction. The local public expenditure is biased to infrastructure construction; education and medical care expenditure are crowded out for having no instant effect on economic growth. Even worse, the environment regulation has been taken slacked as an instrument to attract the capital. The regional competition is universal but the race-to-bottom is not an inevitable phenomenon. The. popular theories talk too much about the competition and multi-task pricinpal-agancy problems, too little about the political process, which is the key as we think to explain China puzzle. In fact, there are many factors in China constraining the local government just like the voting, such as local cadres’ connection with local residents, local social norms, and local social nongovernment organizations. The residents can take actions to change the unwanted policies following the petition law, and local people’s congress is not just rubber stamp, both make the local government more accountable to the local avoiding racing to the bottom. Only economic growth will not bring performance legitimacy to the central government of China, but with public goods and service satisfied by the residents, so the local public policies can be so far deviated from the residents’ preference. The central government has the unquestionable power to control the local government directly, the nomination, promotion or demotion of local leader is decided from top to down according their governance performance. The local leader must take all the responsibility for everything happened in their jurisdiction, economic growth, social stability and so forth. Fierce anger expressed against local government by the resident will shadow the future of the local leader or attract direct interventition from the central government, which will punish the local government. The division of political responsibility between the central and local government allow the residents to voice their preference out to push the local policy unwanted to be changed, effect an direct polical accoutablity. Satisfied local policies need local knowledge and information which are in the hands of residents, information cost make principal-agency problem prevail in the political organizations. The residents take actions to send the relevant information directly to the policy maker, which makes the voice mechanism a great advantage in improving the local governance, especialy when there are collusions between local government and enterprises. Maybe it is the voice mechanism makes the polical regime more resilient than any other authoritarian regimes.The local people’s congress is a formal voice channel for the residents, which is backed up by the law. After explaining the foundamental institution and laws of the supervision power of local people’s congress, we find out in two most famous environment protection cases the difference in local congressman’s action dictate the difference of the result. The environmental claim will be satisfied only when the local congressmen stand by them. Based on the provincial panel data of China, we find that the local congress can make the local government spend more on environment protection and increase the environment standard, interestingly, the local congress decreases the enterprises’share of pollution mitigation expenditure, more subsidies are paid to enterpises to use clean techniques or to by pollution control equipments. It is not the horizontal political power division that powered the local congress, but the voice of the residents. The residents’petition about pollution will push the local people’s congress give the government more advice on pollution mitigation.The internet penetration effect is an informal voice channel for the residents. When there are collusions, the voice through formal channel maybe manipulated by the special interest man or group, but the voice through internet can spread quickly to the public before being deleted. Media or public coverage will push the government respond to the voice. Based on provincial panel data, we find that the higher the internet penetration the less corrupted offcials. The voice through internet makes the traditionnal anticorruption measures more efficient to check out the corrupted officials, and make it more difficult to protect the deeprooted officals.When the local leaders make decisions, they must calculate the economic constraints and political constraints. Public policy may increase the economic efficiency and bring economic growth, but the policy may break the local political equilibrium and cause social unstability, if the policy deviated too far from the residents’preference. The voice of the residents makes the political constraints on the local government harder. The voice mechanism makes the reginal competition more constructive and less destructive. Maybe the most efficient solution to mitigate the inbalance of development is to make the residents’voice more powerful.