DEPARTMENT OF ECONOMICS, MANAGEMENT AND STATISTICS UNIVERSITY OF MILAN – BICOCCA DEMS WORKING PAPER SERIES A Model of Chinese Central Government: the Role of Reciprocal Accountability

Why was the same state in China able to promote economic growth in the reform era but not in the previous thirty years? In this paper we focus on a speci…c aspect that might help the search for a comprehensive explanation: the speci…c institutional arrangement that induced autocratic government to adopt growth-enhancing policies. To this aim, we consider a standard political agency model (Besley, 2006) where the incumbent leader may be either congruent or not, and where both types need the support of the ‘selectorate’ to hold on to power. Our main result is that in autocracies without electoral discipline, to restrain the opportunistic behavior of a leader, the size of the ‘selectorate’should be intermediate: if too small, the ‘selectorate’is captured by the leader and has no disciplinary role; if too big, the leader’s incentives are diluted. JEL Code: D02, H11, D74. Key Words: Accountability, Selectorate, Political agency, Chinese economic reform. 1The authors gratefully acknowledge the helpful comments and insights of Susan Shirk, Barry Naughton, Peter Drysdale, Lee Benham, Massimo Bordignon, Scott Gehlbach, Philip Keefer, Giovanna Iannantuoni, Peter Murell, Hongbin Li, Nancy Qian, Victor Shih and Colin Xu. They thank discussions with the participants of the 15th Annual Conference of the International Society for New Institutional Economics; the Ronald Coase Institute 2010 Shanghai Workshop; the 34th Paci…c Trade and Development (PAFTAD) Conference; and the 3rd Italian Doctoral Workshop in Economics and Analysis. They also thank comments of Li Han, another anonymous referee, and the editor. A …rst revision of the paper was completed during Yuan Li’s visit to IR/PS, University of California, San Diego. Yuan Li also thanks the German Research Foundation (DFG Graduierten Kolleg 1613) for …nancial