FSS-DECO Seminar: Powerful Politicians and Their Economic Impact
Speaker: Prof. Chang MA, Associate Professor of Finance, International School of Finance, Fudan University, China
Date: 18 March 2026 (Wednesday)
Time: 14:00-15:15
Venue: E21B-G002
Language: English
Abstract: This paper studies the economic consequences of political power concentration using a distinctive institutional arrangement in Chinese cities. Exploiting variation in whether local leaders simultaneously hold executive and legislative positions, we show that cities governed by more powerful politicians experience significantly slower economic growth than cities with a separation of powers. We trace this growth slowdown to fiscal policy distortions: leaders with concentrated authority are more likely to reallocate budgetary expenditures, initiate large-scale investment projects, rely on irregular public–private partnership financing, and favor politically connected agents, thereby exacerbating resource misallocation. While power concentration is associated with higher local government debt and borrowing costs, it also enables more decisive countercyclical fiscal responses during economic downturns, partially offsetting its adverse effects in periods of crisis.
