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IVs … and Democracy and Development Lecture 2. Mistake: should have read Luo et al. (2007) … instead of Li and Rozelle (that is for Monday … Monday’s assignment (Fixed Effects): Shaban Li and Rozelle Make up: Luo et al. (2007). Today. Angrist and Kreuger: IV analysis Notation - PowerPoint PPT Presentation
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IVs … and Democracy and Development
Lecture 2
• Mistake: should have read Luo et al. (2007) … instead of Li and Rozelle (that is for Monday …
• Monday’s assignment (Fixed Effects):– Shaban– Li and Rozelle– Make up: Luo et al. (2007)
Today• Angrist and Kreuger: IV analysis
– Notation– Three uses of IVs:
• Simultaneity• Measurement Error• Omitted Variable (Unobserved Heterogeneity)
– Returns to Human Capital– Other examples from the appendix
• Does democracy lead to development in China?– Luo et al. (2007)
Basic Notation
Y = a0 + a1*X + a2*Z + ewhere Y is the independent variable / outcome var X is the endogenous variable or variable of interest Z is vector of observable control vars. e is the error
[including factors that are unobserved that affect Y]
The problem: cov(x,e) ≠ 0 Estimates of a1 are biased
Basic Notation
Y = a0 + a1*X-hat + a2*Z + e [second stage equation]
X = b0 + + b2*Z + γ*IV + u [first stage equation …]
where control variables, Z, are the SAME in both equationsIV is a vector of instrumental variables
two characteristicsa.) IV has an effect on X (or γ ≠ 0)
b.) IV does not affect Y, except through it indirect effect on X
X-hat is the prediction from the first stage equation and in a multivariate framework ONLY contains 1 type of net information part of X that is affected by IV
Go to Angrist and Krueger
Scott Rozelle, Stanford UniversityLinxiu Zhang, Jikun Huang, Renfu Luo, Chengfang Liu, CCAP
Village Governance and Transforming Rural China’s Communities
Large Investments are Needed to Improve the Quality of Life in
Rural Areas
Yet some villages have better infrastructure (and have enjoyed a higher “quantity” of investment in recent years) … What role does local governance play (ceteris paribus)?
Interest in the literature
• Chattopadhyay and Duflo (2004) – Will election rules (e.g., reservation seats for women) affect investment
into type of investment that women want … – Randomly assigned reservations … natural field experiment using village
level data• Besley and Burgess (2001)
– Openness more concentrated effort on helping the poor (using state level data) … newspaper circulation …
– Worry about endogeneity of newspapers … IV: media ownership concentration
• Rosenzweig and Foster (2003)– Will democracy (election of local leaders through an popular vote-based
election) help the poor … by giving them a bigger voice? – Governance structure type of investment using village data– Worry about endogeneity: use log of village population + dummy
variables indicating the passage of legislation relevant to local governance
Our conceptual framework
• Following Rosenzweig and Foster, we believe that elections will affect the spending of China’s village leadership:
from expenditures that benefit the elite (qingke chifan; salaries)
to expenditures that benefit the villages (infrastructure)
Farmer Believing there has been Improvements in Infrastructure since 1998
(from PRA focus groups)(农户小组访谈)
020406080
100R
oa
ds
Irrig
ati
on
Drin
kin
g
Wa
ter
Sc
ho
ols
He
alt
h
Percent of farmers
Farmer Dis-satisfaction with Current Status of Infrastructure
(from PRA focus groups + Surveys)
020406080
100
Ro
ad
s
Irrig
ati
on
Drin
kin
g
Wa
ter
Sc
ho
ols
He
alt
h
Percent of farmers saying “not satisfied”
Also willing to spend resources
Question #1:If your village received
a grant of 50,000 yuan, what would you spend it on?
Answer: 85% said roads, irrigation or drinking water
Question #2:
If village leader asked you to contribute 20 yuan/capita to improve the infrastructure in your village, would you be willing to contribute?
Answer: 79% said “yes”
a. infrastructureb. environmental preservationc. welfare paymentsd. investing in the leadership office
facilities
Main hypotheses
#1: Village elections will induce greater spending on public goods
#2: Because villagers demand greater spending on public goods, leaders that deliver more public goods during their term will have a greater probability of being re-elected
Objectives of Presentation
• Understand the contours of investment in China’s villages and examine differences across villages
• What is the role of governance changes?– How far has local democracy progress?– Do villages with leaders that were elected
investment more projects / higher investment?
• Why?– Do village leaders that invest more in public
goods get rewarded by the villager electorate?
Plan for Talk
Getting the facts right! [collect data]
Measure differences across communities (quantity and quality)
A sketch of China’s shift towards democracy
Empirical analysis: Does having village elections greater levels of investment? Why? Can projects be designed ‘better’ investments? Does having village elections ‘better’ investment?
Getting Data Right [“2000 village study”]
• Collected the data ourselves (Sept. 2003 … revisit in 2005)
• 6 provinces, 1 from each region of China• From each province randomly selected:
– 6 counties / 6 townships / all villages– 6 x 6 x 6 = 216 townships– All villages in each town Collect information on:
Investments (6 years)
Village elections (6 years)
Other village characteristics
Sichuan
Gansu
Shaanxi
Hebei
Jiangsu
Jilin
”2000 village survey”
Distribution of sample counties in China, 2003 Rural China Investment Survey
Total number of villages: 2459
Broad coverage of surveys … [“it was like Typhoon hit our village”]
• Village leader• Party secretary• Village accountant• Small group leaders• 2000 Farm Households• Focus groups• Engineering project evaluations• School / clinic evaluations• “Guerrilla” key informant interviews
Blocks of Survey• Public goods investments / sources
• Engineering-based evaluations (key projects)
• Project design, villager satisfaction and investment choices
• Fiscal data (Tax-for-Fee reform)
• Village elections (Election procedures) … and more (other part of governance structure of village)
• Village Characteristics and Other
Creating the data set
Observation 1:
During 3 year election cycle, how many projects were implement
During 3 year election cycle … was leader elected? [yes or no]
Observation 2:
During 3 year election cycle, how many projects were implement
During 3 year election cycle … was leader elected? [yes or no]
Also move to use total investment
6/7 years of data
N=7041
Creating the data set
Observation 1:
During 3 year election cycle, how many projects were implement/year
During 3 year election cycle … was leader elected? [yes or no]
Observation 2:
During 1 year of term, how many projects were implement/year
During 3 year election cycle … was leader elected? [yes or no]
6/7 years of data
Obs. 4Observation 3:
During last 2 year of term, how many projects were implement/year
During 3 year election cycle … was leader elected? [yes or no] IV does not change over
time … though it is constant across towns
• What are the trends of China’s public investments into its villages over time and across space?
Composition of investment projectspublic vs. development
13%
87%
Total number of projects in sample
9,138 projects (in 2459 sample villages)
Development Projects
Public goods investments
Most of projects in rural China now focus on the provision of public goods … different than the 1980s
Nearly 4 per village during the study period … or almost 1 per year
Scope of public goods investment projects Project
N Total investment (10k yuan)
Build road or bridge 1266 11.2
Build school 850 9.9
Build clinic 163 2.5
Drinking water 636 7.5
Irrigation system 625 6.6
Drainage system 194 6.3 Loudspeaker for village committee 379 6.0
Land improvement 52 11.0
Watershed management 151 29.8
Land Leveling 124 13.6
Beautify environment 157 2.4
Forest closure 140 3.4
Eco-forest 55 3.4
Grain for green 892 6.7
Build pasture 19 13.4
Recreation center 262 5.0
Other public project 10 24.4
N 5,975 10.8
Type of PUBLIC GOODS projects
Around 2/3rds of public goods investments into 5 types of projects
Clinic, 3Drinking water, 11
Irri., 14
Schools, 14
Roads, 21Other
public projects,
37
11
Funding sources of public goods investment projects in rural China
0
10
20
30
40
50
Funded fully fromabove
Jointly funded Funded fully byvillage
Percent of Number of Public Goods Projects
Percent of Total Investment Amount in Public Goods by Source
By villageFrom above
53%47%
0
200
400
600
800
1000
1200
Corvee Labor
Person days per project
Rising Overtime:Public Goods Investment Projects
0
0.2
0.4
0.6
0.8
1
1.2
1998-2002 2003-2004
Projects per year
Rising … But Still Not Enough!Total Spending: China versus Japan/Korea
0
100
200
300
400
500
Japan--50s
Korea-80s
China-2000
China-2004
Total Inv./Capita (US dollars, PPP terms
Distribution of public goods projects, number of projects and amount of
investment
0.1
.2.3
.4.5
.6.7
.8D
ensi
ty
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14total number of PUBLIC projects at village level between 1998-2003
0.1
.2.3
.4.5
Den
sity
0 5 10 15 20 25 30 35 40 45 50 55 60investment volume
Kernel density estimate
Normal density
Units: 10K yuanUnits: number of projects
Mean size of investment project: about 50,000 yuan
Mean number of project: 3 to 4 for sample period
While some villages have lots of projects … others do not!
Determinants of Investment Quantity
Determinants of Quantity (number of projects / amount of investment—yuan)
– Many factors• Village locations• Structure of village economy• Ethnic Make up• Policies (e.g., Tax Reform)
• Village governance reformFocus of
the paper
Village Elections in China
• They are now into 6th to 8th round … on average, there has been 5 elections held in the typical village … [there have been more than 5 million “elections” in rural China since mid-1980s]
• BUT, a lot of heterogeneity
• Despite the progress in holding elections, almost no one is going to claim that they are perfect
• Some leaders still are appointed … procedures are poor …
Village Elections in China
• They are now into 6th to 8th round … on average, there has been 5 elections held in the typical village … [there have been more than 5 million “elections” in rural China since mid-1980s]
• Election of leaders is rising over time
• Some leaders still are appointed … procedures are poor …
Villages that “Directly Elect” Village Leaders … is growing over time
0
20
40
60
80
100
1995 to 1997 2002 to 2004
6983
Percent
Village Elections in China
• They are now into 6th to 8th round … on average, there has been 5 elections held in the typical village … [there have been more than 5 million “elections” in rural China since mid-1980s]
• Election of leaders is rising over time
• Some leaders still are appointed … and it varies across space …
What is going on?China’s rural election
Appointed village leader Elected village leader
Frequency Percent Frequency Percent
Jiangsu 379 28.03 973 71.97
Gansu 213 22.88 718 77.12
Sichuan 114 10.63 958 89.37
Shaanxi 211 19.36 879 80.64
Jilin 79 7.36 995 92.64
Hebei 492 32.33 1,030 67.67
Total 1,488 21.13 5,553 78.87
Though the election have been implemented for many years, there are still villages that do not elect their village leader directly
Village Elections in China
• They are now into 6th to 8th round … on average, there has been 5 elections held in the typical village … [there have been more than 5 million “elections” in rural China since mid-1980s]
• Election of leaders is rising over time
• Some leaders still are appointed … and it varies across space …
• No one claims elections are perfect … but, signs that they are getting better
Quite decentralized (how they run elections?) But there are factors that
affect the nature of the elections
• Election committee governance – (in >80% of village, who runs the elections?: the
village party secretary … that is the leader of the village Communist Party cell … though there are difference in participation of township/county officials)
• Nominations (not transparent … often subject to “approval” of town officials
• Many times villages just won’t have elections … they will only nominate one person … the township will appoint a leader … the towns only let one person run for village leader
So is there a relationship between elections and public goods investment?
-- Descriptive
-- Multivariate
Relationship between election of village leader and total investment
0
0.2
0.4
0.6
0.8
1
Elected Appoint
# o
f p
roje
cts/
year
0
20
40
60
80
100
Elected Appoint
Th
ou
san
d Y
uan
Investment Projects and Elections
Village leader directly elected?("Yes"or"No")
0
5
10
15
20
25
30
35
40
45
Road Irrigation School
Village leader directly elected ? ("Yes" or "No")
0
2
4
6
8
10
12
Road Irrigation School
Yes
Village leader directly elected?("Yes"or"No")
0
5
10
15
20
25
30
35
40
45
Road Irrigation School
Yes
Yes
Yes
No
No
No
Yes
No
Yes
Yes
NoNo
Investment (Thousand Yuan) Village funded investment (Thousand Yuan)
E A E AE A E A E A
E A
Road RoadDrinking Water
Drinking WaterIrri. Irri.
Total investment Investment from village itself
Determinants of Investment Quantity
Determinants of Quantity (number of projects / amount of investment—yuan)
– From paper (by type; by source … using OLS + IV)
– From new work (total investment; by source … using Fixed Effect + GMM)
Road project Probit (Tobit) analysisInvestment= a0 + a1*D-election + a2*other factors+Provincial fixed effects
All funding sources Village funded only Above funded only Have or no road
project (Probit)
Road project investment level
(tobit)
Have or no road project (Probit)
Rroad project investment level
(tobit)
Have or no road project (Probit)
Road project investment level
(tobit) Village leader elected 0. 14 5. 14 0. 15 5. 76 0. 16 12. 40 directly(yes=1,no=0) (3. 38)*** (3. 20)*** (2. 74)*** (3. 13)*** (2. 20)** (2. 01)** Dummy of rural Tax for Fee 0. 12 4. 76 -0. 02 0. 18 0. 14 12. 40 reform(before=0,after=1) (3. 19)*** (3. 10)*** (0. 45) (0. 10) (2. 19)** (2. 30)** Net per capita income -1E-06 -0. 004 2E-04 -0. 001 -1E-04 -0. 001 in 1997(yuan) (0. 02) (1. 96)** (2. 54)** (0. 64) (0. 71) (0. 05) Net per capita income -4E-09 1E-06 -1E-08 2E-06 -5E-08 -5E-06 square in 1997 (0. 31) (2. 96)*** (0. 74) (4. 08)*** (1. 28) (1. 56) Total population in 1997 3E-05 0. 0021 -3E-05 0. 0008 8E-07 -0. 0032 (person) (1. 34) (2. 80)*** (1. 14) (0. 97) (0. 02) (1. 03) Percentage of minority 0. 002 0. 07 0. 001 0. 03 0. 004 0. 27 population in 1997(%) (2. 45)** (2. 16)** (1. 34) (0. 73) (3. 39)*** (2. 69)*** Per capita land in 1997(mu) -0. 017 -0. 64 -0. 033 -1. 03 -0. 010 -1. 10 (1. 66)* (1. 55) (1. 98)** (1. 71)* (0. 58) (0. 77) Percentage of effectively 0. 001 0. 088 0. 001 0. 092 -0. 001 0. 047 irrigated land in 1997(%) (1. 12) (3. 57)*** (1. 53) (3. 32)*** (0. 54) (0. 53) Hilly land over 25 degree in total land in the village in
0. 002 0. 072 0. 001 0. 027 0. 004 0. 211 1997(%) (2. 87)*** (2. 35)** (0. 73) (0. 75) (3. 44)*** (2. 04)** The distance of the nearest -0. 002 -0. 11 -0. 006 -0. 28 -0. 002 -0. 07 road to the village in 1997(Km) (1. 12) (1. 64) (2. 51)** (3. 02)*** (0. 53) (0. 27) The farthest distance between two small groups in this village
-0. 007 -0. 48 -0. 002 -0. 07 -0. 022 -1. 67 in 1997(Km) (0. 99) (1. 79)* (0. 29) (0. 24) (1. 57) (1. 45) The distance between village 0. 0021 0. 15 -0. 0015 -0. 05 -0. 0043 -0. 31 and township seat in 1997(Km) (0. 56) (0. 99) (0. 31) (0. 31) (0. 63) (0. 54) Number of fellow villagers working in township or
0. 006 0. 37 0. 002 0. 07 0. 007 0. 63 county governments(person) (2. 92)*** (4. 41)*** (0. 54) (0. 74) (1. 90)* (2. 00)** The illiterate rate of village -0. 13 -6. 64 -0. 72 -31. 70 0. 44 31. 80 labor force in 1997(%) (1. 00) (1. 28) (3. 92)*** (4. 54)*** (2. 33)** (2. 01)** major road passing by village -0. 05 -1. 01 0. 01 0. 79 -0. 11 -9. 05 (yes=1, no=0) (1. 18) (0. 66) (0. 16) (0. 47) (1. 47) (1. 54) Province Dummy Yes Yes Yes Yes Yes Yes Constant -6E-01 -35. 6 -2E+00 -58. 3 -1E+00 -126 (5. 75)*** (8. 72)*** (11. 6)*** (11. 90)*** (7. 23)*** (7. 37)*** Observations 7041 7041 7041 7041 7041 7041 Pseudo R2 0.03 0.02 0.04 0.03 0.05 0.02
Absolute value of t statistics in parentheses, * significant at 10%; ** significant at 5%; *** significant at 1%
Data source: Authors’ survey.
Road project Probit (Tobit) analysis(Focusing on the D-election coefficient)
All fund source Village funded only Above funded only Have or no
project (Probit)
Investment level
(tobit)
Have or no project (Probit)
Investment level
(tobit)
Have or no project (Probit)
Investment level
(tobit) Village leader elected Directly
0.14 5.14 0.15 5.76 0.16 12.40
(yes=1,no=0) (3.38)*** (3.20)*** (2.74)*** (3.13)*** (2.20)** (2.01)**
Irrigation project Probit (Tobit) analysisInvestment= a0 + a1*D-election + a2*other factors+Provincial fixed effects
All fund source Village funded only Above funded only Have or no
irrigation project (Probit)
Irrigation project investment level
(tobit)
Have or no irrigation project
(Probit)
Irrigation project investment level
(tobit)
Have or no irrigation project
(Probit)
Irrigation project investment level
(tobit) Village leader elected 0.14 4.7 0.15 2.42 0.08 1.95 directly(yes=1,no=0) (3.01)*** (3.23)*** (2.49)** (2.48)** (1.09) (0.63) Dummy of rural Tax for Fee -0.24 -7.7 -0.18 -3.12 -0.15 -7.19 reform(before=0,after=1) (5.54)*** (5.54)*** (3.09)*** (3.39)*** (2.20)** (2.37)** Net per capita income -0.0001 -0.003 0.00010 -0.0004 0.0001 0.005 in 1997(yuan) (1.02) (1.61) (1.38) (0.34) (0.66) (0.92) Net per capita income 1E-09 0.0000004 -3E-09 5E-07 -5E-08 -2E-06 square in 1997 (0.09) (1.20) (0.21) (2.61)*** (1.57) (1.42) Total population in 1997 -6E-05 0.000 -0.0001 -0.001 -2E-05 -0.0004 (person) (2.67)*** (0.45) (4.43)*** (2.75)*** (0.67) (0.27) Percentage of minority 0.000 0.08 -0.002 -0.05 0.003 0.16 population in 1997(%) (0.44) (2.31)** (0.89) (1.52) (2.24)** (2.45)** Per capita land in 1997(mu) -0.02 -0.76 -0.036 -0.26 -0.014 -0.60 (1.24) (1.55) (1.37) (0.67) (0.64) (0.64) Percentage of effectively 0.0036 0.084 0.005 0.08 -0.002 -0.10 irrigated land in 1997(%) (5.19)*** (3.72)*** (5.24)*** (4.96)*** (2.13)** (2.04)** Hilly land over 25 degree in total land in the village in
-0.003 -0.09 -0.0034 -0.06 -0.0020 -0.07 1997(%) (2.99)*** (3.00)*** (2.31)** (2.51)** (1.41) (1.04) The distance of the nearest -0.0056 -0.20 -0.010 -0.14 -0.005 -0.15 road to the village in 1997(Km) (2.30)** (2.54)** (2.04)** (1.90)* (1.34) (0.99) The farthest distance between two small groups in this village
-0.022 -1.03 -0.015 -0.30 -0.02 -1.04 in 1997(Km) (2.26)** (3.23)*** (0.99) (1.24) (1.10) (1.59) The distance between village -0.005 -0.17 -0.003 -0.10 -0.009 -0.08 and township seat in 1997(Km) (1.06) (1.09) (0.44) (0.85) (1.09) (0.24) Number of fellow villagers working in township or
0.004 0.11 -0.006 -0.13 0.003 0.16 county governments(person) (1.62) (1.36) (1.41) (1.87)* (0.72) (0.96) The illiterate rate of village -0.46 -1E+01 -0.32 -3.85 -0.26 -8.29 labor force in 1997(%) (2.85)*** (2.26)** (1.32) (1.01) (1.14) (0.81) Province Dummy Yes Yes Yes Yes Yes Yes Constant -0.75 -28.90 -1.53 -25.48 -1.32 -66.0 (6.67)*** (7.89)*** (9.87)*** (9.67)*** (7.08)*** (7.41)*** Observations 7041 7041 7041 7041 7041 7041 Pseudo R2 0.06 0.02 0.13 0.08 0.03 0.02 Absolute value of t statistics in parentheses, * significant at 10%; ** significant at 5%; *** significant at 1% Data source: Authors’ survey.
Irrigation project Probit (Tobit) analysis(Focus on the D-election)
All fund source Village funded only Above funded only Have or no
project (Probit)
Investment level
(tobit)
Have or no project (Probit)
Investment level
(tobit)
Have or no project (Probit)
Investment level
(tobit)
Village leader elected 0.14 4.7 0.15 2.42 0.08 1.95 Directly (yes=1,no=0)
(3.01)*** (3.23)*** (2.49)** (2.48)** (1.09) (0.63)
Multivariate Analysis: Elections and Investment Quality in China’s Villages
road project (total) Village funded road only Above funded road only
(1) (2) (3) (4) (5) (6)
Probit Tobit Probit Tobit Probit Tobit
Village leader elected directly (yes=1, no=0)
0.08 3.11 0.08 3.18 0.16 12.3
(1.90)* (1.91)* (1.42) (1.72)* (2.10)** (1.95)*
irrigation project (total) Village funded irrigation only Above funded irrigation only
Village leader elected directly (yes=1, no=0)
0.13 4.09 0.13 1.74 0.05 1.38
(3.06)*** (3.11)*** (2.19)** (1.98)** (0.81) (0.45)
school project (total) Village funded school only Above funded school only
Village leader elected directly (yes=1, no=0)
0.14 18.2 0.18 4.13 0.17 15.2
(2.42)** (2.94)*** (2.18)** (2.42)** (1.79)* (2.32)**
Dependant variable Number of public goods projects per term (All public goods projects)
(1) ols (2) Tobit (3) Fixed effect
The way village leader acceded to office 0.178 0.293 0.314
(0=appointed,1=elected directly) (4.60)*** (4.90)*** (4.85)***
Roads
irrigation
drinking water
All projects
Election variable
Election variable
Election variable
Dependent
variables
+ ++ ++
++ +
+
++++ +
+
+
+++
Problem with OLS regression
• Unobserved heterogeneity
• Need IV (use both 2SLS and bivariate probit):
Investment = a0 + a1*election + a2*other factors + eElection = b0 + b1*IV + b2*other factors + u
Where, IV is specified to be two variables (in paper):a.) measure of rule: does slate of village leader candidates have to be “approved by the township” as part of the election process
b.) number of meetings held for a village’s election that was attended by officials from county and township
[pass exclusion restriction/over-ID tests … there is no obvious evidence in descriptive statistics that suggest rules and investments are related …
RHS Controls and IVs: Correlations?The candidate should be
approved by upper government Meetings hold by county and township for term turn over
Yes No More than
fifth Less than fifth
Per capita land in 1997 1.9 2.3 1.9 2.1
Net per capita income in 1997 1621 1352 1751 1412
The illiterate rate of village labor force in 1997 0.1 0.1 0.08 0.11
Number of fellow villagers working in township or county governments 5.6 4.9 6 5
% of hilly land over 25 degree in total land in the village in 1997 21 25 21 24
The distance of the nearest road to the village seat in 1997 6.5 5.6 5.2 6.7
The distance between village and township seat in 1997 5.3 5.2 5.0 5.4
The farthest distance between two small groups in this village in 1997 2.7 2.5 3.2 2.4
Over-identification test and hausman test
Dependant variable Have or no road project Have or no Village funded road project
Chi-sq(1) 1.98 0.295 Hansen-Sargan
over identification
Test
P-value 0.1598 0.587
Chi-sq(1) 0.0526 1.503 Hausman Test
P value 0.8226 0.2202
Dependant variable Have or no irrigation project Have or no Village funded irrigation
project
Chi-sq(1) 2.63 0.237 Hansen-Sargan
over identification
Test
P-value 0.105 0.626
Chi-sq(1) 1.029 0.014 Hausman Test
P value 0.311 0.906
Are our IV measure measuring “dysfunction”?
• Correlation of villages within a township (high) … if they have to approve the nominations of slates of candidates in one village in the township, the probability is high that the township has to approve the slate of candidates of the other village.
• Same is true with number of meetings held with each village (r=0.89)
Accounting for endogeneity of electionsRoad project IV estimation
(IVs: rules on candidate approval during nomination; number of meetings for organizing village election attended by upper-level government officials)
All Funding source project
Village funding project Other controls
0.86[0.15] 1.30[0.07]
Direct election of village leader (yes=1,no=0)
(1.79)* (5.07) ***
Geography, Society and
economic factors
F test value of the instrument variable
17.65 16.45
Marginal effect in bracket; Absolute value of t statistics in parentheses
* significant at 10%; ** significant at 5%; *** significant at 1%
All Funding source project
Village funding project Other controls
1.22[0.1] 0.35[0.02]
Direct election of village leader (yes=1,no=0)
(5.05)*** (0.47)
Geography, Society and
economic factors
F test value of the instrument variable
33.37 30.68
Marginal effect in bracket; Absolute value of t statistics in parentheses * significant at 10%; ** significant at 5%; *** significant at 1%
Accounting for endogeneity of electionsIrrigation project IV estimation
(IVs: rules on candidate approval during nomination; number of meetings for organizing village election attended by upper-level government officials)
The multivariable analyses (OLS) Total investment = a0 + a1*D-election + a2*other factors + e
Yearly public goods projects in latest term Yearly public goods investment in latest term (Log)
All sources Village
funded Co-funded
Above
funded All sources
Village
funded Co-funded
Above
funded
The way village leader acceded to office 0.09 0.06 0.01 0.02 0.77 0.39 0.13 0.25
(0=appointed, 1=elected directly) (4.24)*** (5.20)*** (0.78) (1.66)* (4.98)*** (4.20)*** (1.10) (2.56)**
Tax-for-Fee reform -0.34 -0.06 -0.17 -0.11 -3.50 -0.77 -1.70 -1.40
(after=1,before=0) (11.96)*** (3.96)*** (8.71)*** (7.51)*** (16.64)*** (6.17)*** (10.62)*** (10.53)***
Target factors
net per capita income in 1997(1000 yuan) -9.19 51.31 -38.59 -21.91 -29.05 461.89 -290.40 -213.38
(0.75) (7.67)*** (4.66)*** (3.45)*** (0.32) (8.65)*** (4.26)*** (3.77)***
Percentage of minority -0.0002 -0.00001 -0.0003 0.00004 0.001 -0.001 0.002 0.0004
population in 1997 (0.66) (0.05) (1.10) (0.22) (0.30) (0.78) (0.74) (0.25)
Hilly land over 25 degree in total 0.0006 0.0001 0.0002 0.0004 0.01 0.0001 0.0005 0.0060
land area in the village in 1997 (1.67)* (0.27) (0.82) (1.87)* (2.43)** (0.03) (0.22) (3.50)***
Total population in 1997(1000 ren) 37.3 5.3 21.5 10.5 278.5 65.3 258.0 92.1
(3.51)*** (0.91) (2.99)*** (1.90)* (3.58)*** (1.41) (4.36)*** (1.87)*
The illiterate rate of village -0.03 -0.05 -0.01 0.02 -0.4 -0.5 -0.01 0.4
labor force in 1997 (0.58) (1.47) (0.20) (0.69) (1.02) (1.92)* (0.04) (1.64)
The distance between village committee -0.001 0.001 -0.0004 -0.001 -0.008 0.004 0.010 -0.010
and township seat in 1997 (0.67) (0.70) (0.37) (1.55) (0.61) (0.52) (1.01) (1.21)
The distance of the nearest road -0.002 -0.002 0.0001 -0.0001 -0.01 -0.01 -0.003 -0.005
to the village seat in 1997 (2.05)** (3.70)*** (0.15) (0.25) (2.06)** (3.76)*** (0.64) (1.37)
Demand factors
The number of village/group 0.02 0.02 0.0005 -0.0002 0.11 0.16 0.03 -0.003
enterprise in 1997 (2.94)*** (5.32)*** (0.10) (0.05) (2.04)** (4.74)*** (0.81) (0.09)
Per capita land in 1997 (mu) -0.010 -0.006 -0.003 -0.001 -0.02 -0.03 -0.03 0.03
(2.06)** (2.19)** (0.97) (0.38) (0.63) (1.70)* (1.02) (1.16)
Percentage of effectively -0.001 -0.0001 -0.0002 -0.001 -0.003 0.001 0.001 -0.006
irrigated land in 1997 (3.96)*** (0.44) (0.72) (6.21)*** (1.33) (0.94) (0.32) (4.13)***
The farthest distance between two small 0.005 -0.001 0.002 0.003 0.02 0.002 0.01 0.02
groups within this village in 1997 (1.53) (0.52) (1.15) (1.99)** (0.89) (0.12) (0.49) (1.59)
Other Factors
Number of fellow villagers working in 0.005 0.000 0.004 0.001 0.03 0.001 0.028 0.008
township or county governments (4.19)*** (0.40) (4.88)*** (1.29) (3.53)*** (0.27) (4.17)*** (1.35)
Age of village leader 0.001 0.002 -0.001 0.001 0.02 0.02 0.003 0.01
(1.22) (2.88)*** (1.15) (0.82) (1.92)* (3.26)*** (0.44) (1.70)*
Education of village leader 0.02 0.02 -0.01 0.01 0.04 0.21 -0.10 0.07
(1.52) (3.56)*** (1.63) (1.31) (0.43) (3.83)*** (1.45) (1.11)
Prior occupation of village leader -0.04 -0.03 -0.02 0.01 -0.33 -0.20 -0.23 0.12
(pure farmer=1,others=0) (2.12)** (2.54)** (1.81)* (0.95) (2.48)** (2.50)** (2.22)** (1.47)
The time of the village leader 0.07 0.01 0.03 0.03 0.44 0.06 0.19 0.26
acceded to office (15.82)*** (3.45)*** (10.11)*** (13.67)*** (14.50)*** (3.25)*** (8.32)*** (13.60)***
Results from the multivariate analyses(Focusing on the coefficient of the direct election dummy
variable)
Yearly public goods projects in latest term
Yearly public goods investment in latest term (Log)
All sources
Village funded
Co-funded Above funded
All sources
Village funded
Co-funded Above funded
0.09 0.06 0.01 0.02 0.77 0.39 0.13 0.25 Ols
(4.24)*** (5.20)*** (0.78) (1.66)* (4.98)*** (4.20)*** (1.10) (2.56)**
0.16 0.04 0.08 0.04 0.95 0.26 0.63 0.36 Fixed
effect (4.67)*** (2.55)** (3.38)*** (2.40)** (3.53)*** (1.79)* (3.26)*** (2.25)**
Fixed Effects Analysis Investment = a0 + a1*D-election + a2*other factors + Village effects
Yearly public goods projects in latest term Yearly public goods investment in latest term (Log)
All sources Village funded
Co-funded Above funded
All sources Village funded
Co-funded Above funded
The way village leader acceded to office
0.16 0.04 0.08 0.04 0.95 0.26 0.63 0.36
(0=appointed,1=elected directly)
(4.67)*** (2.55)** (3.38)*** (2.40)** (3.53)*** (1.79)* (3.26)*** (2.25)**
Tax-for-Fee reform -0.30 -0.05 -0.14 -0.11 -3.41 -0.70 -1.60 -1.39
(after=1,before=0) (9.99)*** (3.36)*** (7.12)*** (7.31)*** (14.75)*** (5.65)*** (9.63)*** (10.20)***
Age of village leader -0.001 0.001 -0.003 0.0005 0.00 0.02 -0.01 0.01
(0.44) (1.59) (2.23)** (0.51) (0.33) (2.54)** (1.22) (0.82)
Education of village leader
0.005 -0.005 -0.005 0.015 -0.07 -0.05 -0.10 0.10
(0.20) (0.46) (0.36) (1.34) (0.41) (0.56) (0.80) (0.99)
Prior occupation of village leader
-0.027 -0.0005 -0.033 0.006 -0.36 -0.11 -0.22 -0.01
(pure farmer=1,others=0)
(0.77) (0.03) (1.40) (0.34) (1.32) (0.78) (1.11) (0.04)
The time of the village leader
0.06 0.01 0.03 0.03 0.46 0.07 0.19 0.27
acceded to office (15.33)*** (4.29)*** (9.42)*** (14.08)*** (14.40)*** (4.22)*** (8.20)*** (14.24)***
Constant -129.1 -17.6 -52.1 -59.3 -925.5 -148.0 -379.2 -542.9
(15.29)*** (4.27)*** (9.36)*** (14.08)*** (14.43)*** (4.33)*** (8.23)*** (14.36)***
Observations 7041 7041 7041 7041 7041 7041 7041 7041
Number of village id 2448 2448 2448 2448 2448 2448 2448 2448
R-squared 0.06 0.01 0.03 0.05 0.06 0.01 0.03 0.05
Results from the multivariate analyses(Focusing on the coefficient of the direct election dummy
variable)
Yearly public goods projects in latest term
Yearly public goods investment in latest term (Log)
All sources
Village funded
Co-funded Above funded
All sources
Village funded
Co-funded Above funded
0.09 0.06 0.01 0.02 0.77 0.39 0.13 0.25 Ols
(4.24)*** (5.20)*** (0.78) (1.66)* (4.98)*** (4.20)*** (1.10) (2.56)**
0.16 0.04 0.08 0.04 0.95 0.26 0.63 0.36 Fixed
effect (4.67)*** (2.55)** (3.38)*** (2.40)** (3.53)*** (1.79)* (3.26)*** (2.25)**
IV-GMM Analysis Investment = a0 + a1*D-election + a2*other factors
(IV=lag value of D-election)
Yearly public goods projects in
latest term Yearly public goods investment in
latest term (Log)
All
sources Village funded
Co-funded
Above funded
All sources
Village funded
Co-funded
Above funded
The way village leader acceded to office 0.11 0.02 0.06 0.03 0.62 0.15 0.64 0.26
(0=appointed,1=elected directly) (1.80)* (1.74)* (1.59) (0.86) (1.81)* (1.59)* (1.91)* (0.96)
Observations 4587 4587 4587 4587 4587 4587 4587 4587
N=4587 not 7041
What is the mechanism?
Why do elected leaders invest more?
May be a “Reverse Relationship”between investments and re-election
0
0.2
0.4
0.6
0.8
1
Re-elected NotReelected
# o
f p
roje
cts/
year
What happens after an elected term?• Reformulate the sample:
– Throw away all leaders that were appointed
– 4 categories– Keep leaders that were
elected (n=5000 or so)• Don’t use sample of
village leaders that “turned into” party secretaries
• Don’t use elected village leaders that decided not to run / resigned early
– Left with two groups:• Incumbents that ran and
won• Incumbents that ran and
lost All leaders that were elected
Incumbents that won
Incumbents that lost
Made into party secretaries
Did not rerun or resigned early
What happens after an elected term?
• Reformulate the sample:
Left with two groups:• Incumbents that ran
and won (n=3100)• Incumbents that ran
and lost (n=800)
N = about 3900
All leaders that were elected
Incumbents that won
Incumbents that lost
Did not rerun or resigned early
Reverse Regression (fixed effects)Reelected = a0 + a1*number of projects + a2*other factors +
V + eTable 11 The yearly public projects number (investment level) in latest tem and the re-election
(re-appointment) of village leader
Re-election (1=yes,0=no) Re-appointment (1=yes,0=no)
Public projects number 0.05 0.06 -0.02 -0.07
(2.54)** (2.30)** (0.54) (1.36)
Above funded public projects number 0.03 0.14
(0.47) (0.88)
Village funded public projects number 0.15 -0.42
(2.59)*** (3.49)***
Co-funded public projects number 0.07 -0.06
(1.82)* (0.72)
Public investment level 0.003 0.003
(1.42) (0.68)
Average investment level per project -0.002 0.009
(0.66) (1.44)
Average investment level of above 0.004 -0.001
funded public projects (0.92) (0.10)
Average investment level of village -0.01 0.02
funded public projects (1.94)* (2.20)**
Average investment level of co-funded -0.005 0.01
public projects (1.47) (1.51)
Age of incumbent -1.43 -1.43 -1.43 -1.42 -0.75 -0.74 -0.75 -0.72
(14.67)*** (14.70)*** (14.68)*** (14.55)*** (4.35)*** (4.29)*** (4.37)*** (4.23)***
Education of incumbent 0.03 0.04 0.02 0.02 0.45 0.46 0.44 0.45
(0.18) (0.22) (0.16) (0.14) (1.34) (1.36) (1.31) (1.34)
Year Dummy yes yes yes yes yes yes yes yes
Constant 5.57 5.61 5.57 5.49 3.03 2.98 3.10 3.13
(10.63)*** (10.69)*** (10.61)*** (10.44)*** (4.15)*** (4.11)*** (4.24)*** (4.33)***
Observations 3718 3718 3718 3718 875 875 875 875
R-squared 0.19 0.18 0.19 0.19 0.13 0.13 0.14 0.18
The evidence of election incentive 2(Focus on public investment with village fixed effect)
Re-election (1=yes,0=no)
Public projects number 0.05 0.06
(2.54)** (2.30)**
Above funded public projects number 0.03
(0.47)
Village funded public projects number 0.15
(2.59)***
Co-funded public projects number 0.07
(1.82)*
Public investment level 0.003
(1.42)
Average investment level per project -0.002
(0.66)
Average investment level of above 0.004
funded public projects (0.92)
Average investment level of village -0.01
funded public projects (1.94)*
Average investment level of co-funded -0.005
public projects (1.47)
More public goods project, more chance of Re-election
Is there the same effect when village leader were appointment?
Re-appointment (1=yes,0=no)
Public projects number -0.02 -0.07
(0.54) (1.36)
Above funded public projects number 0.14
(0.88)
Village funded public projects number -0.42
(3.49)***
Co-funded public projects number -0.06
(0.72)
Public investment level 0.003
(0.68)
Average investment level per project 0.009
(1.44)
Average investment level of above -0.001
funded public projects (0.10)
Average investment level of village 0.02
funded public projects (2.20)**
Average investment level of co-funded 0.01
public projects (1.51)
Nothing is significant when leader is reappointed … therefore his performance in the village does not matter
Summary
• Elections in a number of different regressions … using types of investments … sources of investment … and total investment (# of projects / investment levels) … PLUS different estimating strategies (IV / FE / GMM) find positive impact
• Mechanism: Pork barrel politics, with Chinese characteristics
Support for the literature• Rosenzweig and Foster (2003)
– Will democracy (election of local leaders through an popular vote-based election) help the poor … by giving them a bigger voice?
– Governance structure type of investment using village data– Worry about endogeneity: use log of village population + dummy
variables indicating the passage of legislation relevant to local governance
• Chattopadhyay and Duflo (2004) – Will election rules (e.g., reservation seats for women) affect investment
into type of investment that women want … – Randomly assigned reservations … natural field experiment using village
level data• Besley and Burgess (2001)
– Openness more concentrated effort on helping the poor (using state level data) … newspaper circulation …
– Worry about endogeneity of newspapers … IV: media ownership concentration
n.a.
Plus LOTS more to do
• Using new IV (county level protocols)• Using “quality of election” and protocols to
see whether or not the type of election matter …
• Looking at other aspects of governance (how about the Communist Party Cell?)
• Effect of elections on “quality of investments”
Thank you