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Target Setting in Tournaments: Theory and Evidence from China

67 Pages Posted: 21 Mar 2017 Last revised: 26 Dec 2017

Xing Li

Peking University - Guanghua School of Management

Chong Liu

Peking University

Xi Weng

Peking University

Li-An Zhou

Peking University - Guanghua School of Management

Date Written: December 26, 2017

Abstract

Motivated by the prevalence of economic targets at all levels of territory administration in China, this paper proposes a Tullock contest model to study optimal target setting in a multi-layered tournament-based organization. In our model, targets are used by upper-level official to convey the importance of economic growth and incentivize subordinates in the tournaments. Our model predicts a top-down amplification of economic growth targets along the jurisdiction levels, that explains the observed pattern in China. Using both provincial and prefectural level data, we test the model predictions and find consistent evidence.

Keywords: Top-down amplification, bureaucratic incentives, multi-level government, regional competition

JEL Classification: H11, H7, O2, P3

Suggested Citation

Li, Xing and Liu, Chong and Weng, Xi and Zhou, Li-An, Target Setting in Tournaments: Theory and Evidence from China (December 26, 2017). Available at SSRN: https://ssrn.com/abstract=2937195 or http://dx.doi.org/10.2139/ssrn.2937195

Xing Li (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Chong Liu

Peking University ( email )

Xi Weng

Peking University ( email )

Beijing, 100871
China

Li-An Zhou

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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