A political foundation of public investment and welfare spending

This paper develops a political economy model to examine the implications of selection under an authoritarian regime. We formalize fiscal policy choice local governments, focusing on two mechanisms and their for public investment welfare spending. A growth-oriented promotion system induces officials increase investment, which may output but crowd out transfers. mimics recent investment-driven growth in China relatively low effort tackle high inequality. Under broader incentive structure, we show that it is possible regime attain social democracy.