Decentralization and Collusion Increase China S Coal Mine Deaths

CHINA’S COALMINE DEATHS CAUSED BY GOVERNMENT GROWTH TARGETS

The rise in deaths in China’s notorious coalmines between 1998 and 2001 was driven by local politicians aiming to meet growth targets and ignoring concerns about health and safety. Because economic growth is a key measure of performance used to decide whether local politicians will be promoted, they were more likely to allow firms to undertake profitable but dangerous mining.

That is the main finding of research by Ruixue Jia and Huihua Nie, to be presented at the Royal Economic Society’s 2012 annual conference. Their study looks at changes in government policy in China and their affect on coalmine deaths in different Chinese provinces between 1995 and 2005.

In March 1998, the central government decentralised all 94 state coalmines and delegated their supervision to the provincial governments. This lasted until February 2001, when the State Administration of Coal Mine Safety was established and re-centralised safety supervision powers.

The authors find that death rates increased by 25% between 1998 and 2001 so that on average 30 more workers died each year in each province. Moreover, about 120 more workers died each year in the provinces whose safety governors were native to the area. These governors had more links with local firms, which allowed them to drop safety standards in exchange for higher growth.

The researchers argue that politicians favouring growth over people’s rights is likely to be commonplace so long as the incentives for politicians are skewed in favour of growth. They find that one way to mitigate this effect is through media exposure. The more newspapers there were per 1,000 individuals, the fewer deaths took place.

But in a country where the press is heavily restricted, the authors are pessimistic:

‘The current promotion rule of the Communist Party is a double-edged sword. When growth is of paramount importance, collusion with firms is a rational choice for provincial and local leaders.

‘Collusion contributes to the double-digit growth figures, but it also creates the worst safety record of any country in the world.’

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Politicians allow coalmine firms to choose dangerous but profitable modes of production, because they benefit from colluding with the firms. That is the political-economy explanation for the notorious records of coalmine safety in China in a study by Ruixue Jia and Huihua Nie.

The study asks how policy shifts at the central government level affected coalmine death rates in different Chinese provinces between 1995 and 2005. In March 1998, the central government decentralised all the 94 key state coalmines and delegated their supervision right and management to the provincial governments. This decentralisation period lasted until February 2001, when the State Administration of Coal Mine Safety was established and re-centralised safety supervision powers.

The authors find that death rates increased by 25% in the decentralised period (1998-2001), such that on average 30 more workers died each year in each province. More importantly, about 120 more workers died each year in the provinces whose safety governors are native, as these governors have more extensive local networks that facilitate collusion with local firms.

The authors also find that media exposure, measured by newspapers published per 1,000 individuals, decreases the death rates in the whole period.

Over the last few decades, China has experienced rapid industrialisation and economic growth. Meanwhile, China has become internationally notorious for public bads– problems such as weak occupational safety protection, environmental pollution and ecological deterioration.

One critical perspective to understand the link between growth and its costs is to investigate the role of local governments. In China, political leaders at different levels of governments have strong incentives to promote economic growth, as growth performance is an important criterion for their promotion. Hence, they are often tolerant of unsafe or polluting technologies.This tolerance becomes more significant when they also get money or other benefits from firms.

Due to the potential collusion between politicians and firms, some well-intentioned policies might be messed up. Most existing studies on democratic countries have shown that decentralisation makes governments more accountable.

But this study finds an opposite effect of decentralisation in the context of Chinese coalmine deaths. More careful research is needed to evaluate the consequences of public sector decentralisation in non-democratic countries such as China.

Are there ways to prevent collusion? The paper provides some evidence on the benefit of media exposure. But the key to the question is political.

The current promotion rule of the Communist Party is a double-edged sword. When growth is of paramount importance, collusion with firms is a rational choice for provincial and local leaders. Collusion contributes to the double-digit growth figures, but it also creates the worst safety record of any country in the world.

ENDS

‘Decentralization, Collusion and Coalmine Deaths’ by Ruixue Jia (IIES, Stockholm University) and Huihua Nie (People’s University of China)

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Ruixue Jia

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+46-8-16 30 72

Huihua Nie

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