Leadership rotations and the convergence of subnational economic policies in China: evidence from provincial government work reports

Abstract

This article examines how China’s subnational leadership rotations have affected local governments’ policy choices. Utilizing the annual government work reports that outline provincial policy priorities, I find that shuffled leaders choose similar economic policies across different provinces, and this translates into similarities in several policy outcomes. I then show that such policy isomorphism has been driven mainly by convergence in which topics these reports cover, rather than by convergence in how the provincial leaders discuss a given policy issue. However, according to the event study estimates, this economic policy similarity may disappear soon after the shuffled leader leaves office, thus implying that the policy convergence might be transitory. One plausible explanation for these findings is that leadership rotations often indicate that the central government favors the policies implemented by these shuffled leaders, so they tend to replicate some of these policies after moving to the destination province. (JEL H11, H70)