I am a Lecturer (equivalent to Assistant Professor) in Economics at
Monash University in Melbourne, Australia.
My research interests are in Political Economics, Economic History,
and Organizational Economics.
Email: weijia.li@monash.edu
Address: Department of Economics
Monash Business School
Building H, Room H4.48, 900 Dandenong Road
Caulfield East, VIC 3145, Australia
Publications
Erosion of State Power, Corruption Control, and Fiscal Capacity (with Gérard Roland and Yang Xie)
The Economic Journal, Volume 132, Issue 644, May 2022
We model how corruption erodes state power, i.e., the state’s ability to keep its apparatus under control in crises. Under a general assumption about fat-tailed risk of crisis, we show that given strong fiscal capacity, the head of the state will control local corruption at such a level that its power is secured; given weaker capacity, the state will over-tolerate corruption to retain officials, risking control in crises; moreover, a state may be trapped with too weak fiscal capacity, rampant corruption, and the state losing control in any real crisis, while having little incentive to invest in fiscal capacity. By developing historical narratives, we show that these theoretical results are consistent with experience from the Roman Empire, New Kingdom of Egypt, Ming China and many other powerful states in history.
Crony capitalism, the party-state, and the political boundaries of corruption (with Gérard Roland and Yang Xie)
Journal of Comparative Economics Volume 50, Issue 3, September 2022
China’s anti-corruption campaign since 2012 has raised questions about the role of corruption in China’s political economy. To analyze this issue systemati- cally, we build a model that unifies crony capitalism, the hierarchy of the Chinese party-state system, and the decision-making process inside the Party Center. We show that inefficient economic institutions create local corruption that improves productivity, while generating rents that flow along the party-state hierarchy up to the provincial level, threatening the Center’s control in potential crises. Given a general fat-tailed risk of crisis, we show that the Center will choose its tolerance of local corruption in priority to maximize crisis control, at the expense of the economy. Power structure and corruption within the Party Center and the recip- rocal accountability between the central and provincial leaders are also modeled and analyzed. Our analysis explains recent developments in the Chinese economy and politics.
Working papers
Rotation, Performance Rewards, and Property Rights
R&R, The Economic Journal
Economic growth needs a strong and well-functioning government. But a government too strong can dominate private firms, leading to a holdup problem that is especially severe in autocracies. This paper studies how to constrain officials in autocracies through personnel rules, with a special focus on rotation and performance evaluation. Through a game theoretic model, I show that rotation or performance evaluation alone actually makes holdup problems even worse. But it is exactly their combination that covers each other's weakness and solves holdup problems together. Frequently rotated and carefully evaluated, officials also develop few entrenched interests in existing firms. This helps avoid crony capitalism and encourages Schumpeterian "creative destruction", solving another key problem with government-assisted development. Thus, rotation and performance rewards resolve the acute tradeoff between commitment and flexibility, a feature rarely satisfied by other commitment devices. Firm-level panel data from China are consistent with the key predictions of the model.
Dual Leadership and Bureaucratic Capacity
Awarded the 2020 Asia-Pacific Prize in Economic History
This paper studies an institutional foundation of bureaucratic capacity. I construct a model to explain why autocracies tend to appoint a political governor and an eco- nomic governor to co-rule the same province (Weber, 1978). The model shows that the joint appointment secures the loyalty of provincial governments in an especially robust manner. Therefore, the joint appointment resolves the trade-off between loyalty and competence, allowing the autocrat to invest in bureaucratic capacity. I then construct a novel dataset tracing Chinese political institutions for over 1,300 years from original historical records written in classical Chinese. The dataset confirms that a meritocratic bureaucracy arose after the appointment of an economic governor to check the political governor, an institution also correlated with a much lower frequency of revolts. Case studies further show that the joint appointment is widely adopted across historical autocracies to support a strong bureaucracy.
Hobbesian Wars and Separation of Powers (with Gérard Roland and Yang Xie)
This paper formalizes the principle that persecution power of government may generate violent contests over it. We show that this principle yields a large set of theoretical insights on different separation-of-powers institutions that can help to preempt such contests under different socio-economic conditions. When socio-economic cohesion is low, the risk of contests can be eliminated only by individual veto against persecution. Moreover, such unanimity rule is resilient to autocratic shocks only when the chief executive does not control the legislative agenda, i.e., the executive and legislative branches are separate. When socio-economic cohesion is high, the risk of violent contests can be eliminated without individual veto, but only by a persecution-reviewing judiciary whose members cannot join the executive branch in the future, i.e., when the executive and judicial branches are separate. Our results shed light on the evolution of separation of powers in European history.
Digital Populism and Minimalist Democracy (with Elliot Foote)
We develop a model where a populist produces and distributes anti-"elite" rhetoric, in anticipation of how voters respond to the rhetoric. By doing so, we provide a framework to understand how populism is affected by changes in technology and the institutional environment. The model uncovers a complementarity between digital media and voter suppression in producing populism. The complementarity explains the uneven strength of populism across time and space. The complementarity produces two more implications. First, under strong voter suppression, a more "centrist" society encourages populism. Second, populism in the digital era is intrinsically hostile towards even a "minimalist" democracy, a key insight that explains the recent revival of voter suppression efforts.
Work in progress
(with Yang Xie) Decay of Long-established Constitutions
(with Shaoda Wang) An Economic Theory of Salvation Religions
(with Klaus Ackerman, Simon Angus, Nathan Lane, and Paul Raschky) Mapping the Digital State
(with Nathan Lane) Information is Power - Monopoly Power, Information Technology, and the Rise of the Digital State