Strategic fiscal spending: Evidence from China

Abstract

What are the effects of citizen grievances on autocrats' fiscal spending? I argue that autocrats will increase fiscal spending only when grievances may jeopardize stability. I hypothesize that when Internet penetration is high, a marginal increase in labor strikes and administrative lawsuits leads to increased spending on social welfare, health, education, and housing support. Evidence from China's 31 provinces (2006–2019) supports this hypothesis. The results are robust to instrumental variable strategies. The results may run against the expectations of the “selectorate theory” which posits that autocrats are generally disinclined to increase spending for citizens. My theory and evidence suggest that grievances will be perceived differently by autocrats according to different levels of connectivity, leading to different levels of spending.