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Incentivized Inequality: Career Incentives and Investment Allocation in China

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Abstract

Bureaucratic career incentives play a critical role in shaping how government officials influence local resources within their jurisdictions. This study suggests that the career incentives of subnational officials are instrumental in determining whether the government manages resources in a manner that either mitigates or exacerbates regional inequality in localities. Using a unique dataset of Chinese provincial officials from 1995 to 2019, this study measures an official's career prospects as a predicted probability of promotion. The empirical results demonstrate that Chinese provincial governments were likely to promote more investments and channel them into wealthier sub-regions when composed of a greater proportion of officials facing intense competition. On the other hand, a higher proportion of provincial officials who had reached the end of their careers prompted the government to prioritize poorer sub-regions. Interestingly, political rising-stars, whose career prospects are significantly higher than others, promoted less investment because they are risk-averse and prefer to maintain their current status.

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Data Availability

The data are available upon request.

Notes

  1. The author’s interviews with retired officials from the central and provincial organization departments confirmed this point by quoting “Regardless of division of work, economic development is every leader’s responsibility” and “the first priority of the provincial standing committee members is provincial economic growth.”.

  2. The military representatives (e.g., commanders or political comissars) in the Provincial Standing Committees were excluded from the analysis because their career incentives differ substantially from those of their civilian counterparts.

  3. Promotions or transfers to nominal and “second-line” positions, such as the National People’s Congress and the National People’s Political Consultative Conference, were not included in the analysis.

  4. Variables that indicates an official’s economic performance, such as GDP growth rates and fiscal incomes, were excluded from the analysis due to potential bias to the main outcome variable (i.e., fixed-asset investment).

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  1. S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore, Singapore

    Jonghyuk Lee

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Lee, J. Incentivized Inequality: Career Incentives and Investment Allocation in China. J OF CHIN POLIT SCI (2023). https://doi.org/10.1007/s11366-023-09871-1

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