I am a Lecturer (equivalent to Assistant Professor) in Economics at

Monash University in Melbourne, Australia. 

My research interests are in Political Economics, Development Economics,

and Economic History.

 

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

 

Working paper​s

Rotation, Performance Rewards, and Property Rights

 

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. 

 

 

Meritocracy and Dual Leadership: Historical Evidence and an Interpretation

 

This paper studies the origins of bureaucratic capacity, both empirically and theoretically. I apply textual analysis to Chinese historical records; from these records, I construct a novel dataset tracing the evolution of political institutions for over 1,300 years. The dataset uncovers a key empirical regularity: a meritocratic bureaucracy arose only after emperors established a strong “separation of powers” among provincial officials, an institution also correlated with a much lower frequency of revolts. To explain these findings, I construct a model where the central government faces a loyalty-competence trade-off: a competent governor can weaponize his competence to challenge the central government. I show that the central government resolves the trade-off by appointing a political governor and an economic governor to co-rule a province. Case studies further show that the separation between economic and political powers is an important hallmark in many stable autocracies.

 

(with Gérard Roland and Yang Xie) Crony Capitalism, the Party-State, and the Political Boundaries of Corruption

How do corruption and the state apparatus interact, and how are they connected to the political and economic dimensions of state capacity? Motivated by historians' analysis of powerful empires, we build a model that emphasizes the corrosive effect of corruption on state power. Under general assumptions about fat-tailed risk, we show that the optimal response for the head of the state apparatus is an endogenous lexicographic rule whereby local corruption is maintained at such a level that no erosion of state power is tolerated. Comparative statics shows the impacts of additional risk of crisis on corruption tolerance as well as the complementarity between personalistic rule and corruption. Implications of corruption at the head of the state apparatus are also analyzed.  We also investigate the conditions under which deviation from the lexicographic rule, over-tolerance of corruption, and erosion of state power become possible, showing a non-monotonic relationship in the relation between state power and corruption across different levels of fiscal capacity. The main results of the model are robustly consistent with empirical patterns based on recent cross-country panel-data.

 

Aristocracy, Meritocracy, and Property Rights (draft available upon request)

Why some regimes maintain a persistent meritocracy, while others are captured by aristocrats? I argue that in an environment with weak property rights, a meritocratic government and a thriving private economy reinforce each other. Enriched commoners can supply a large number of candidates to the government that prevents patrimonialization, while meritocracy promotes the private economy through de facto property rights. By contrast, an aristocratic government can dominate the private economy, which in turn cannot supply enough candidates to break hereditary politics. The theory matches important historical episodes such as the great ``Tang-Song Transition'' in China. I also show how legal property rights sufficiently strong can eliminate multiple equilibria, and that stronger property rights cause a more dynastic government. When commoner's property is well protected by law, commoner's incentive to engage in political competition is reduced. This allows ``political dynasties'' to capture the government. The extended model is employed to illustrate the difference between meritocracies in Imperial China and the Ottoman Empire. It also implies a causal relationship between comparative law and state building.

 

 

 

 

Work in progress

Comparative Economics and Party-Government Relationships

 

(with Klaus Ackerman, Simon Angus, Nathan Lane, and Paul Raschky)  Mapping the Digital State

 

(with Nathan Lane) Economic Origins of Digital Dictatorship and Democracy 

(with Gerard Roland and Yang XieRevolutionary Capital and the Dynamics of Revolutions and Protests

(with Shaoda Wang and Zenan Wang) Bureaucrats and State Effectiveness: Evidence from the Bereavement Leave Rules in Historical China