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Why Do Autocrats Decentralize? WHY DO AUTOCRATS DECENTRALIZE? by Yu Xiao B.Phil. in Philosophy, Peking University, 2008 M.A. in Politics, New York University, 2010 M.A. in Political Science, University of Pittsburgh, 2015 Submitted to the Graduate Faculty of the Dietrich School of Arts and Sciences in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Pittsburgh 2019 UNIVERSITY OF PITTSBURGH DIETRICH SCHOOL OF ARTS AND SCIENCES This dissertation was presented by Yu Xiao It was defended on March 30th, 2019 and approved by Aníbal Pérez-Liñán, Department of Political Science and Keough School of Global Affairs, University of Notre Dame Scott Morgenstern, Department of Political Science, University of Pittsburgh Pierre Landry, Department of Government and Public Administration, Chinese University of Hong Kong Iza Ding, Department of Political Science, University of Pittsburgh Dissertation Advisors: Aníbal Pérez-Liñán, Department of Political Science and Keough School of Global Affairs, University of Notre Dame, Scott Morgenstern, Department of Political Science, University of Pittsburgh ii Copyright © by Yu Xiao 2019 iii WHY DO AUTOCRATS DECENTRALIZE? Yu Xiao, PhD University of Pittsburgh, 2019 Economic decentralization has profound effects on a country’s economic performance, but not all countries pursue decentralization. Why do some countries see decentralization as a better strategy for development than others? What political conditions facilitate or inhibit economic decentralization in autocracies? Studies that focus on democracies have largely reach a consensus that politically decentralized systems tend to pursue economic decentral- ization policies. This dissertation contends, however, that there is an opposite relationship in autocracies. Specifically, it is the politically centralized autocracies that are more likely to pursue economic decentralization policies. I argue that this difference is because in autoc- racies, economic decentralization policies often result from a top-down delegation process, as opposed to a bottom-up bargaining process that often prevails in democracies. This dissertation develops a game-theoretical model to analyze the top-down economic decentralization process in autocracies. I demonstrate that political centralization can make the subnational government more willing to follow the national economic agenda and con- sequently make the national government more willing to decentralize economic resources. I test the theoretical model with a comparative case study of China from 1949 to 1962 and Mexico from 1917 to 1948. The Chinese case confirms that its centralized political system in the 1950s contributed to the economic decentralization policies during the Great Leap Forward. The Mexican case corroborates that its decentralized political system in the 1920s contributed to the Mexican federal government’s consistent efforts to centralize economic resources at the federal level from the 1920s to the 1940s. A further test analyzes a sample of 59 countries from 1972 to 2016. The results support that political centralization reduces iv economic decentralization in democracies but facilitates economic decentralization in au- tocracies. The dissertation contributes to our understanding of the different patterns of economic decentralization and economic governance between democracies and autocracies. v TABLE OF CONTENTS PREFACE ......................................... xvi 1.0 INTRODUCTION ................................. 1 1.1 PUZZLE ..................................... 2 1.2 RELEVANCE OF THE RESEARCH QUESTION .............. 3 1.2.1 Decentralization ............................. 3 1.2.2 Authoritarian regimes .......................... 5 1.3 EXPLAINING ECONOMIC DECENTRALIZATION ............ 6 1.3.1 Definitions of Key Concepts ....................... 6 1.3.2 Rationale for Conceptualization ..................... 8 1.3.3 Reasons for Economic Decentralization ................. 10 1.3.3.1 Socioeconomic Reasons ..................... 11 1.3.3.2 Institutionalist Reasons ..................... 14 1.4 A DELEGATION THEORY OF ECONOMIC DECENTRALIZATION IN AUTHORITARIAN REGIMES ........................ 17 1.4.1 Contribution to the Literature ..................... 19 1.5 STRUCTURE OF THE DISSERTATION .................. 20 2.0 A GAME-THEORETICAL MODEL OF ECONOMIC DECENTRAL- IZATION ....................................... 24 2.1 INTRODUCTION ............................... 24 2.2 CONSIDERATIONS OF THE NATIONAL GOVERNMENT ....... 25 2.2.1 Maximizing Economic Resources and Authority ............ 26 2.2.2 Maximizing Economic Efficiency .................... 27 vi 2.2.3 Economic Policy Implementation .................... 29 2.3 CONSIDERATIONS OF THE SUBNATIONAL GOVERNMENT ..... 31 2.3.1 Economic Policy Preferences ...................... 32 2.3.2 Rewards and Punishments ........................ 33 2.4 A GAME-THEORETICAL MODEL ..................... 34 2.4.1 National Government’s Utility Functions ................ 35 2.4.2 Subnational Government’s Utility Functions .............. 39 2.5 DISCUSSIONS ................................. 42 2.5.1 Subnational Government’s “Deviation Threshold” ........... 42 2.5.1.1 Deviation Threshold and Economic Decentralization Level . 43 2.5.1.2 Determinants of Deviation Threshold ............. 44 2.5.2 Deviation Thresholds and the SPNE Outcomes ............ 48 2.5.3 Empirical Implications .......................... 54 2.6 CONCLUSIONS ................................ 59 3.0 COMPARING CHINA AND MEXICO ................... 63 3.1 WHY COMPARING CHINA AND MEXICO? ................ 64 3.2 TESTING CAUSAL MECHANISMS ..................... 71 3.2.1 Conceptualizing the Causes and Outcomes ............... 73 3.2.2 Scope Conditions ............................. 74 3.2.3 What to Expect? ............................. 75 4.0 CHINA (1949–1962) ................................ 77 4.1 INTRODUCTION ............................... 77 4.2 HISTORICAL BACKGROUND ........................ 78 4.3 PREDICTED CAUSAL MECHANISM .................... 84 4.4 PROCESS-TRACING EVIDENCE ...................... 86 4.4.1 Centralized Political System ....................... 86 4.4.1.1 Unitary Constitutions ...................... 86 4.4.1.2 Centralized CPC Prior to 1949 ................. 89 4.4.1.3 Regime Consolidation Process (1949–1953) .......... 96 4.4.2 SNG: High Deviation Thresholds .................... 101 vii 4.4.2.1 SNG: Similar Policy Preferences ................ 102 4.4.2.2 SNG: Strong Career Incentives ................. 117 4.4.3 SNG: Policy Implementation ...................... 122 4.4.3.1 Land Reform (1949–1953) ................... 122 4.4.3.2 Socialist Transformation of Agriculture (1953–1956) ..... 130 4.4.4 NG: Strong Trust and Desire of Economic Decentralization ..... 133 4.4.4.1 The Central Government (Mao) Trusted the Local Officials . 133 4.4.4.2 The Central Government’s Economic Incentives for Economic Decentralization ......................... 136 4.4.5 Economic Decentralization Policies and Provincial Responses .... 138 4.4.5.1 Economic Decentralization Policies .............. 139 4.4.5.2 Provincial Governments’ Responses .............. 141 4.5 CONCLUSIONS AND DISCUSSIONS .................... 146 4.5.1 Main Findings .............................. 146 4.5.2 Implications ............................... 149 5.0 MEXICO (1917–1948) .............................. 153 5.1 INTRODUCTION ............................... 153 5.2 HISTORICAL BACKGROUND ........................ 154 5.3 PREDICTED CAUSAL MECHANISM .................... 158 5.4 PROCESS-TRACING EVIDENCE ...................... 160 5.4.1 Decentralized Political System ..................... 160 5.4.1.1 Federal Constitution ...................... 160 5.4.1.2 A Revolution without Party .................. 161 5.4.1.3 Postrevolutionary Regional Fragmentation .......... 163 5.4.1.4 The Political Centralization Process (1920–1946) ....... 167 5.4.2 SNG: Low Deviation Thresholds .................... 174 5.4.2.1 SNG: Independent Policy Preferences ............. 175 5.4.2.2 SNG: Low Career Incentives .................. 180 5.4.3 SNG: Policy Deviations ......................... 183 5.4.3.1 1920s: Governor Zuno of Jalisco ................ 184 viii 5.4.3.2 1930s: Governor Maximino Ávila Camacho of Puebla .... 187 5.4.3.3 State Governments’ Fiscal Policy Deviations ......... 193 5.4.4 NG: Frustrated and Desired Higher Economic Centralization Levels . 200 5.4.5 Fiscal Centralization Policies and State Governments’ Responses .. 203 5.4.5.1 Fiscal Centralization Policies .................. 203 5.4.5.2 State Governments’ Responses ................. 210 5.5 CONCLUSIONS AND DISCUSSIONS .................... 214 5.5.1 Main Findings .............................. 214 5.5.2 Limitations of the Model ........................ 216 5.5.3 Alternative Explanations ........................ 218 5.5.4 Implications ............................... 219 6.0 AUTOCRACIES AND DEMOCRACIES .................. 222 6.1 INTRODUCTION ............................... 222 6.2 POLITICAL (DE)CENTRALIZATION’S EFFECTS IN DEMOCRACIES AND AUTOCRACIES ............................. 223 6.3 MEASURES, DATA, AND MODEL ..................... 227 6.4 MAIN RESULTS AND DISCUSSIONS .................... 234 6.5 TESTS OF NONLINEAR EFFECTS AND CONDITIONAL EFFECTS . 238 6.5.1 Quadratic Effects ............................. 238 6.5.2 Conditional Effects ............................ 241 6.6 CONCLUSIONS ................................ 246 7.0 CONCLUSIONS .................................. 248 7.1 CENTRALIZED DECENTRALIZATION
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