Local Officials Turnover And Investment Fluctuation

This article attempts to enhance the understanding of macroeconomic stability by identifying the impact of local officials'turnover to investment growth. Evidence found that the replacement of local officials makes the year's investment growth rate reduced by about 1.5 percentage points. Before the 1990s, the officials'replacement did not bring about investment volatility, and thereafter result in significant fluctuations in investment. The turnover of local officials in the eastern region mostly reduce that year's investment growth, similar phenomenon also exists in the western region significantly, while the central region there is no such a phenomenon. Finally, relative to the secretary, the impact of local officials change to investment level, the phenomenon is more prominent in the governor part. In the basis of these empirical results, this article sub-divide investment into two sub-investments -urban fixed assets investment and rural fixed assets investment. Then we attempt to identify the impact of local officials'turnover to the growth of the two sub-investments. Just to get a further understanding of the impact of local officials'turnover to investment growth, in order to enhance the understanding of local officials'turnover to the macroeconomic stability. Evidence found that the replacement of local officials makes the year's urban fixed assets investment's growth rate reduced by about 1.8 percentage points. But we don't find obvious evidence to prove the impact of the replacement of local officials to rural fixed assets investment. These differences reflect the specific central-local relationship and mechanisms for promotion that focus on economic performance indicators in China is an important institutional factors, which would influence the urban fixed assets investment then evoke investment's volatility, thus affecting our country's macroeconomic stability. Meanwhile, the specific central-local relationship and mechanisms for promotion, which focus on economic performance indicators in China, is likely to acting as a factor that expands the investment and the income gap between urban and rural areas in china.