The Last Strike: Age, Career Incentives and Taxation in China

Abstract

Enhancing taxation capacity is crucial to state building in developing countries. While numerous studies argue that political selection serves as a high-powered incentive mechanism for fiscal revenue collection, empirical evidence is mixed. This study adopts a regression discontinuity (RD) design to estimate the magnitude of the career incentive effect by exploiting two institutional designs for political selection in China: the age threshold for promotion and regulated term limits. By analyzing the age threshold to enter the last promotion eligible term (50-55 years old), our RD design shows that prefectural party leaders extract additional fiscal revenue to demonstrate their competence. We also show empirical support for the political competition mechanism that the promotion tournament becomes more intense when prefectural party leaders enter their last promotion-eligible term.

Keywords: Career incentives, political selection, taxation, China, regression discontinuity design