Grassroots Democracy and Local Governance.pdf

Available online at Selected Papers of Beijing Forum 2006 Grassroots Democracy and Local Governance: Evidence from Rural China Shuna Wang, Yao Yang Graduate student, Department of Economics, University of Virginia Professor, China Center for Economic Research, Peking University Abstract: This paper studies the impacts of village elections on the accountability of the village committee, local fiscal sharing, and state taxation in rural China using data of 48 villages for the period of 1986—2002. Elections are found to substantially increase the share of public expenditures in the village budget, but reduce the shares of administrative costs and income handed to the township government. Those findings suggest that elections have enhanced the accountability of the village committee, but weakened local fiscal sharing and the state’s grip. No strong evidence is found that state taxation is affected by elections, nor it is found that the role of a more competitive election is different from that of a closed election. ? 2009 Published by Elsevier Ltd. Keywords: grassroots democracy, local governance, village elections, Asia, China JEL classification Numbers: D31, D72, H41 Acknowledgement We thank Mengtao Gao, Yan Shen, Xiaobo Zhang, three anonymous referees, and the participants of workshops in IFPRI, Nanjing Agricultural University, the Singapore National University, and Peking University for their helpful comments. The Research Center for Rural Economy, Ministry of Agriculture, the People’s Republic of China provided assistance in data collection. Financial supports from the Chinese Medical Board, the World Bank, and the National 211 Projects, China are gratefully acknowledged. Does grassroots democracy enhance local governance? In theory, there is no definitive answer to this question. While democracy tends to empower local people and thus, increases the accountability of the local government, the decentralized nature of grassroots democracy may