Politics, growth, and inequality in rural China: does it pay to join the Party?

Economic reform is often constrained because rank-and-file bureaucrats resp onsible for implementation have vested interests that oppose change. Drawin g on an unusual longitudinal survey data set for a representative rural cou nty in northern China, we show an alternative, positive scenario consistent with the presence of an implicit, performance-based incentive contract tha t ties the household incomes of local officials to market liberalization, i ncreases in consumer demand, and the provision of local public goods. The m echanisms appear to be tolerated as the fruits of growth are shared fairly equitably, thus allowing implementation of a politically and economically s elf-reinforcing reform process. (C) 2000 Elsevier Science S.A. All rights r eserved.