Progressive Leadership and Economic Development in China

Abstract

The death of Mao gives economists and other social scientists a rare chance to study the effects of economic reforms in a communist country. In order to test the hypothesis that individual political leaders are significant for economic development, this paper provides both quantitative and qualitative data. The qualitative data supports the notion that provinces with progressive leaders with connections to the central government experienced higher levels of economic development compared to provinces with more conservative leaders. A two-way fixed effects model is used to analyze data from every province. Data was provided All China Marketing Research. In this analysis, economic development is measured, in yuan, through GDP per capita. This paper defines progressive leadership as the percentage share of State Owned Enterprises in relation to Gross Industrial Output Value. Lower percentage share was interpreted as progressive leadership. The data show that not only did private industrial output increase, but also that State Owned Enterprise output decreased during the same time period. Holding all else equal, this study found that if a province were to increase state involvement from 0-100%, that province would experience a reduction of GDP per capita by 9.1%. The progressive economic reforms that were established after Mao’s death resulted in incredible economic growth and has helped establish China’s position in the world economy.