Incentivizing Corruption: An Unintended Consequence of Bureaucratic Promotions in China

Abstract

Conventional wisdom holds that in non-democracies, a strong central state can reward and punish local administrations through a merit-based promotion system, which should restrain corruption. But much evidence shows that rampant corruption coexists with powerful central governments. This study resolves this puzzle by incorporating bribes in a tournament model. Our model predicts that when bribes are more important than performance in superiors’ total gain, or if there is a lack of serious punishments for wrong-doing, or an increase in promotion gain, promotion can incentivize corruption. Using a fuzzy regression discontinuity design exploiting exogenous variations in officials’ likelihood of promotion from a mandatory age cutoff for bureaucratic promotion in China, combined with a unique biographical database of prefecture party secretaries and novel measures of corruption, we find that promotions encourage corruption in China. Moreover, prefecture party secretaries are more corrupt if their provincial superiors are connected to central factions, suggesting that upper-level factionalism is one of the disincentives that breaks down lower-level meritocracy.

Keywords: corruption, promotion, bribe, meritocracy, factionalism