Bottom-Up Institutional Change and Growth in China

This paper investigates the role of bottom-up reforms in driving China’s economic growth. Leveraging granular documentation from county-level gazetteers, we identify local reform events from 1976 to 2005, capturing de facto policy innovations and their diffusion. Our findings show that bottom-up reforms primarily drive growth through productivity improvements, while centrally sponsored reforms operate mainly through capital accumulation. While both learning and suitability drive reform diffusion, suitability to local conditions matters more for bottom-up than centrally sponsored reforms. Early adopters of bottom-up reforms were typically politically peripheral counties, suggesting that limited central oversight created political space for risky reform initiatives.