We study how political hierarchy shapes regional development in China, using variations driven by regime changes during the 1000–2000 C.E. period. We find that changes in the status of the provincial capital led to the rise and decline of different prefectures as measured by population and urbanization. Two other novel findings stand out: (1) the economic advantages of the provincial capitals did not persist if they lost their political status, and (2) political hierarchy shaped economic development not only through public employment but also through the development of important infrastructure, such as transportation networks. Our findings highlight the importance of politics in determining the locations of economic activities.

Scholars have argued that powerful individuals can exert influence on the path of a nation’s development. Yet the process through which people can have an effect on macro-level political economy outcomes remains unclear. This study uses the deadliest civil war in modern history, the Taiping Rebellion (1850–1864), to elucidate how one person—Zeng Guofan—used his personal elite networks to organize an army to suppress the rebellion, and how these networks would affect the nation’s power distribution. Two findings stand out: (i) counties that already had more prewar elites in Zeng’s networks experienced an increase in soldier deaths after he took power; and (ii) postwar political power shifted significantly toward the home counties of these elites, creating a less balanced national-level power distribution. Our findings highlight how micro-level elite networks can influence national politics and societal power distribution, shedding new light on the relationship between elites, war, and the state.