Revising the Law-Growth Hypothesis: a case study of reform-era China

Alice Xie, College of Arts and Sciences '14

| CSCC Conference Room, Fisher-Bennett 345

The law-growth hypothesis, which holds that the rule of law is essential to economic growth, has been a cornerstone of development and political thought for decades. China, which has broken historic records in GDP growth despite lacking the rule of law, challenges this conventional wisdom. While China has received increasing attention with respect to the hypothesis, this paper is among the first to holistically examine its economic and legal development since the onset of the post-Mao reforms. I argue that China’s legal-economic development followed three stages. First, early growth occurred through spontaneous illegal economic activity. Next, successful private sector expansion stimulated legal recognition. Finally, systemic government efforts to support growth produced a rule-by-law state. This experience reveals important limits to the law-growth hypothesis: in its initial growth independent of strong legal foundations, in the atypical causality between law and growth, and in the continuing rule-by-law state in place today.