Promotion Incentives, GDP Manipulation and Economic Growth in China: How Does Sub-National Officials Behave When They Have Performance Pressure?

27 Pages Posted: 11 Nov 2018

See all articles by Q. Albert Zhou

Q. Albert Zhou

University of Maryland

Jiangnan Zeng

University of Pittsburgh - Department of Economics

Date Written: October 19, 2018

Abstract

In this paper, we attempt to answer two questions. What role does a mayor’s promotion incentive play in China’s regional economic growth? How do mayors behave when faced with promotion pressure? In doing so, we argue that significant GDP manipulation could partially reduce the explanatory power of promotion tournament theory in explaining China’s economic growth although through this tournament mechanism, the upper level government could still select high ability officials. To support our argument, we employ a regression discontinuity design that accounts for the age restriction imposed by the Communist Party of China (CPC) on the promotion of China’s prefecture-level city mayors. The empirical results show that mayors’ promotion incentives significantly increase the growth rate of statistical GDP by around 2% to 3%, while their effect on night-time light growth (an indicator of real economic growth) is merely 0.5%. This significant gap can be attributed to the artificial manipulation of GDP statistics, which is about 2.5%. The analysis points to the limits of performance-based promotion scheme in China and calls for caution when studying the complexity of sub-national officials’ behaviors when they have performance pressure.

Keywords: promotion incentive, regression discontinuity design, GDP manipulation, economic growth

JEL Classification: H11, H77, O43, P16

Suggested Citation

Zhou, Q. Albert and Zeng, Jiangnan, Promotion Incentives, GDP Manipulation and Economic Growth in China: How Does Sub-National Officials Behave When They Have Performance Pressure? (October 19, 2018). Available at SSRN: https://ssrn.com/abstract=3269645 or http://dx.doi.org/10.2139/ssrn.3269645

Q. Albert Zhou (Contact Author)

University of Maryland ( email )

Tydings Hall, 3114 Preinkert Dr
College Park, MD 20742
United States

Jiangnan Zeng

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
225
Abstract Views
1,176
rank
169,375
PlumX Metrics