Collective Leadership, Career Concern, and the Housing Market in China : The Role of Standing Committees

Despite an emerging literature on political determinants of economic performance in China, little is known about whether standing committees of the Communist Party, an institution of collective leadership, matters for economic development. Using Chinese provincial level data for 1997-2011, we find that a higher ratio of new members in the standing committee of the local Communist Party is correlated with a higher housing sales/GDP ratio. In addition, more new members in the standing committee are also associated with a lower level of GDP per capita and a lower manufacturing output growth rate. The results on the size of the real estate sector are robust to a series of alternative specifications, including controlling for potential omitted variables, as well as instrumenting the ratio of new standing committee members this year with the proportion of the provincial standing committee members over the age of 59 in the previous year. Our findings suggest that career incentives of party leadership affected real estate development at the expense of manufacturing growth in the locality, and that the structure of collective leadership does have important economic consequences