Constitutional Reform, Rent Extraction, and Economic Development in China

Abstract

This paper analyzes the constitutional history of China, with the aim of explaining how and why the policies that produced its rapid growth came to be adopted. The paper argues that constitutional reforms played important roles in China's economic development and are likely to do so in the future. Changes in the political rules of the game increased the relative influence of urban interests along China's east coast, which indirectly increased support for international trade and the extension of domestic markets. The theory and historical narrative developed is based on the constitutional exchange model of reform developed in Congleton (2001, 2011a) and research on rent extraction (McChesney 1987, 1997). The analysis fills an important void in the research program on Chinese decentralization (Qian and Weingast 1997), which does not provide an explanation for the decentralization that helped create elite Chinese support for economic development.

Keywords: China, Rent Extraction, Constitutional Exchange, Trade Liberalization, Constitutional Political Economy

JEL Classification: D72, F13, N45