China has experimented with village elections for nearly 20 years. Using village and household survey data collected from 48 villages of 8 Chinese provinces for the period 1986–2002, this paper studies how the introduction of elections affects village governance and income distribution in Chinese villages. The econometric analysis finds the following outcomes. First, village elections have increased the share of public expenditure and reduced the share of administrative expenditure in the village budget, so the accountability of the elected village committee has been enhanced. Second, elections have not led to more income redistribution; instead, they have reduced the progressiveness of income redistribution. Third, elections have reduced income inequality measured by the Gini coefficient in villages. The reduction is equivalent to 5.7 percent of the sample average, or 32 percent of the growth of the Gini coefficient in the period of 1987–2002. Because village elections have not led to more income redistribution, this positive effect must have come from more public investment, which benefits the poor more than wealthier people. The general conclusion that we draw from our results is that, despite institutional constraints, village elections have improved village governance and the life of villagers.
