Does Setting Performance Targets Work in Bureaucracies? Evidence from China's Great Leap Forward

Abstract

This paper explores whether setting performance targets works in bureaucracies using the case of Mao Zedong’s grain yield targets in 1958-1961. Mao wishfully set targets for Chinese counties according to their geographic locations, incentivizing local officials to over-report grain output and excessively extract food from farmers. Using novel county-level data combined with a spatial regression discontinuity strategy, we find that the targets led to excess death tolls in China’s Great Famine. Further investigation suggests that the famine is a root cause of China’s current regional human capital disparity. We highlight the distortionary effects of setting performance targets in bureaucracies.

Keywords: China’s Great Famine, Performance Target, Spatial Regression Discontinuity, Long-Term Effect

JEL Classification: O21, P26, Q18