Central Administration and the Rise of Local Institutions: Evidence from Imperial China

Abstract

In this paper, I study whether a strong centralized state facilitated the development of local institutions in Imperial China from 1000 A.D. to 1900 A.D. I exploit plausibly exogenous variation in the state administrative capacity in the local area induced by regime changes. Using a novel and newly digitized prefecture-level panel dataset, I find that local institutions flourished when the state administrative capacity was strong and prevalent. This is likely because a strong centralized state could better co-opt local institutions, which granted them political power. Further investigation reveals that local regions exposed to weaker state administrative capacity did not receive compensating investments in public goods from the central state. This illustrates an important development issue: places with weak centralized states lack public goods provision both from the state and local institutions. As a result, these regions might face more developmental difficulties.