WEN Yanbing:A New Broom Sweeps Clean:Is There Chinese-style Political Business Cycle?

Abstract：Politics is an important cause of economic growth and fluctuations.We present a new Political Business Cycle Theory based on the background of Chinese economic transformation and government behavior, explore the National Congress of the Communist Party of China, the “two sessions” and its government rotation's impact on evolution of the behavior of local government officials.Based on 1994-2012 inter-provincial panel data of China, SYS-GMM and LSDVC, we find that there are significant PBC and Rotation effect in China, the political cycle affect economic behavior of local governments (the rotation behavioral effects), and affect local economic development (the rotation economic effects) in fiscal decentralization and Promotion Tournament.The effect is sustained and robust, so we provide an explanation of a Chinese proverb “new broom sweeps clean” from economic perspective and verify the Chinese-style Political Business Cycle(CPBC).We provide new ideas for further improving the functions of government, optimizing macro control, and avoiding economic heat caused by political rotation.

Key words： Political Business Cycle   Rotation Effect   New Broom Sweeps Clean

source:Finance & Trade Economics ,No.11,2014