Competence versus Incentive:Evidence from City Officials in China[*]

Tianyang Xi (席天扬), Yang Yao (姚洋)[†] and Muyang Zhang (张牧扬)[‡]

No. E2015001           February 13, 2015

Preliminary draft, comments are welcome.

Abstract This paper empirically studies the roles of competence and incentive in affecting the performance of public officials. We aim at answering two questions: Does competence or incentive matter more for economic performance? Do they tend to substitute or complement for each other? Using a unique dataset of Chinese city officials for the period 1994-2011, we estimate each official's relative level of competence to promote economic growth and identify the effects of incentive using age limits and political cycles for promotion. We find that both competence and incentive matter for officials' economic performance, but competence explains more than incentive. In addition, incentive matters less for more competent officials. Our results show that competence is more important than incentive to affect politicians' economic performance.

Keywords: Political selection, promotion tournament, Chinese bureaucracy.
 
 
 
No.E2015001.pdf
 
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[*] We thank Kjetil Storesletten, Fabrizio Zilibotti and participants of the workshop \Quantitative Studies of the Chinese Elite", University of California-San Diego, February 7-8, 2015, for their helpful comments and suggestions.
 

[†] The National School of Development (CCER), Peking University
 

[‡] School of Public Administration, The Shanghai University of Finance and Economics