“Equality, the Disinterested Government, and Economic Growth: The Case of China” by Yang Yao
National School of Development
We put forward a political economy explanation to China's economic success in the last thirty years. This explanation is centered at the concept of disinterested governments, i.e., governments that do not have consistently differentiated interests among the segments of the society. In a repeated Stackelberg game of a government and two groups of citizens, we show that under reasonable constraints on the returns to revolutions, a disinterested government arises if and only if the two groups of citizens have relatively equal political powers that determine their capabilities to initiate successful revolutions. We also show that the social output is higher under a disinterested government than under a biased government. We provide historical evidence to show that the Chinese government has been disinterested in the last thirty years and attribute it to the absence of significant social inequality in China.