Territorial Competition in China and the West

Abstract

Territorial economic competition first emerged in North America, appeared in Europe during the 1980s, and recently in many LDC/transition economies chasing FDI. In China the process is key to economic development, but operates without the electoral competition and private land markets which are central in the West. We relate developments in each to a general model whereby local circumstances shape selective coalitions of economic agents, and hence policy mixes, differing in their wastefulness and redistributive effects. In the Chinese case, strong competition (involving much waste) is primarily driven by ambitious local officials seeking promotion by pursuing centrally determined growth targets.