Local Elections and Consumption Insurance

📖 The Scoop

During our sample period from 1987 to 2002, Chinese villages completed the transition from government-appointed village leaders to elected ones. This article examines if and how much democratic elections of the village leaders affected consumption insurance by Chinese village residents. Exploring a panel dataset of 1,400 households from this period, we find that consumption insurance is around 20 percent more complete with elected village leaders. Furthermore, local elections improve consumption insurance only for the poor and middle-income farmers, but not for the rich. The results are robust when we allow for pretrending, potential endogeneity of elections, and higher measurement errors for rich residents. We also find that the effects on consumption insurance are stronger when closer to the upcoming election year and when the village committees consist largely of non-Communist Party members. These findings suggest that the election effects on consumption insurance partly come from increasing accountability to local constituents.

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