China Journal of Economics

2025, v.12;No.45(01) 153-171

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How Can Local Governments Cope with Economic Policy Uncertainty from the Central Government: A Network Perspective

Hao Ren;

Abstract:

Policy uncertainty from higher levels of government is an important challenge for local governments' effectiveness. Based on organizational theory, this paper proposes that forming inter-governmental networks is a strategic choice for local governments coping with central government economic policy uncertainty. I empirically test this by using 2005—2019 data on provincial party secretary off-site visits as a proxy for inter-governmental networks. The results show:(1) Central government economic policy uncertainty significantly increases the frequency of provincial party secretaries' off-site visits;(2) Local governments' choices for coping with uncertainty are heterogeneous. Local governments without horizontal inter-governmental ties and with stronger governance capabilities are more likely to strengthen their network connections with other local governments to address central government economic policy uncertainty;(3) Provincial party secretaries' off-site visit positively moderate the relationship between economic policy uncertainty and firm innovation, demonstrating the effectiveness of intergovernmental networks in coping with uncertainty.

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Foundation: 国家自然科学基金青年项目“地方政府间非正式合作对国内市场一体化的影响:因果识别、机制分析与对策研究”(项目编号:72104074)的资助

Authors: Hao Ren;

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