I am a Lecturer (equivalent to Assistant Professor) in Economics at
Monash University in Melbourne, Australia. I also serve as an
associate editor of the Economic Journal.
My research interests are in Political Economics, Economic History,
and Organizational Economics. My recent research focuses on the institutional
and religious foundations of constitutional government.
Email: weijia.li@monash.edu
Address: Department of Economics
Monash Business School
Building H, Room H4.60, 900 Dandenong Road
Caulfield East, VIC 3145, Australia
Papers
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 systematically, 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.
Rotation, Performance Rewards, and Property Rights
conditionally accepted, 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 local officials in autocracies through personnel rules, with a special focus on rotation and performance-based evaluation. Through a game theoretic model, I show that rotation or performance evaluation alone makes the holdup problem even worse. But it is exactly their combination that covers each other’s weakness and solves the holdup problem together. Therefore, an entrepreneur invests if and only if rotation and performance evaluation are both sufficiently intense. Firm-level panel data from China are consistent with the key predictions of the model.
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.
Working papers
Separation of Powers as a Guardian of Civil Peace (with Gérard Roland and Yang Xie)
We model civil conflict and separation of powers in a dynamic game of contest for the executive power to persecute and expropriate. We show that separation of powers helps to secure civil peace, since it safeguards strong executive constraints, without which elites would fight over the power to persecute. The exact form of separation of powers required varies with socio-economic development: under low economic inter-connectedness within the elite, it is essential to keep the chief executive from setting the constitutional agenda; under high interconnectedness, it is vital to insulate judges’ future career paths from the executive branch. Our results shed light on the evolution of separation of powers from emphasizing legislative independence to prioritizing judicial independence, and thus on the rise of majoritarian democracy with an independent judiciary in modern times.
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 economic 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.
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