Top‐Down Central Inspection and Subnational Discretion in Policymaking

ABSTRACT Effective governance requires maintaining a balance between central political control and subnational discretion. However, empirical evidence remains limited and thin on how different central control instruments may affect the level of subnational discretion. In this study, we argue that top‐down inspection, as an instrument of central political control, may disrupt subnational discretion in policymaking, that is, subnational discretion repeatedly declines and then rebounds toward its initial or normal level. This phenomenon is most likely to occur when top‐down inspection is combined with an under‐institutionalized accountability system. We test this proposition by examining the effect of central disciplinary inspections on the patterns of provincial industrial policymaking in China. Using a novel dataset of 612 central‐level and 1907 provincial‐level industrial policies adopted between 2001 and 2019, we find that provincial discretion in industrial policymaking decreases significantly during the “early‐warning phase” and the “closing phase” of inspection, and rebounds toward its original level during the “dormant phase” of inspection. Further analysis suggests that informal ties between central and provincial political leaders have a moderating effect on the disruption from inspection.