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

 

Publications

Erosion of State Power, Corruption Control, and Fiscal Capacity (with Gérard Roland and Yang Xie)

forthcoming, Economic Journal

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)

forthcoming, Journal of Comparative Economics​​

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 paper​s

Hobbesian Wars and Separation of Powers (with Gérard Roland and Yang Xie)

To investigate the relationship between political authority and civil conflict in weakly institutionalized environments, we analyze the Markov perfect equilibrium of a dynamic game of contest and persecution in a king’s council. In each period, council members can contest the kingship; the emerging king can propose persecution subject to the council’s vote given a decision rule, which measures the degree of political authority. We show that it is only under unanimity rule that civil peace will be secured, whereas under any non-unanimity rule, perpetual Hobbesian wars, in which every council member contests the kingship in each period, can feature in equilibrium. Allowing the council to change its decision rule periodically, we show that separating the king from the council’s agenda-setting power on constitutional issues is critical to the resilience of unanimity rule. Introducing a judiciary that oversees persecution, we show that under non-unanimity rule, civil peace can be preserved only if the judicial members are socially cohesive with the subjects of persecution and cannot join the executive council later. We discuss the implications of our results for a wide range of political-economic issues with historical and contemporary examples.

 

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. 

 

Meritocracy and Dual Leadership: Historical Evidence and an Interpretation

Awarded the 2020 Asia-Pacific Prize in Economic History

 

This paper studies the origins of bureaucratic capacity, both empirically and theoretically. I apply text 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.

 

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. 

 

 

Work in progress

(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