Strict Party Governance and Economic Development : Evidence from China

Political Governance plays an important role in economic development. We use text-analysis techniques to construct a Strict Party Governance (SPG) Index and study it's relationship with China’s economic development. Empirical results show that SPG has significantly improved China’s economic development, the effect is more pronounced in regions with higher proportion of the state-owned economy and higher level of fiscal decentralization. We find that the government efficiency and the marketization level are important channels. Further analysis shows that SPG plays a more significant role during the period of anti-corruption and areas with weaker legal protection