14th journées Louis-André Gérard-Varet

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Career Concerns: Beijing Style
Jiahua Che, Kim-Sau Chung, Xue Qiao

Last modified: 2015-05-11

Abstract


Career concerns, Holmstrom style has been celebrated as an important force that motivates bureaucrats in China. Widely neglected, however, is the fact that China’s political system features yesterday’s bureaucrats eventually assuming the leadership today. This raises the question of where the motivation of the leadership comes from and whether such motivation, if any, can in turn discipline bureaucrats as argued in the existing literature.

We present a simple model of overlapping principal-agent problem, where one of yesterday’s agents would be selected/promoted as today’s principal, who then decides how to select/promote one of today’s agents as tomorrow’s principal. We hypothesise a potential incentive, referred to as selection concerns, that may prevent the incumbent leader from completely squandering his public duty today: performing it today may enable himself to better select a successor who can carry out the tasks he cares after retirement.

We derive several implications. First, good government is possible under certain circumstance, but always faces the risk of turning bad as well. Second, more stringent accountability against the leadership has an ambiguous disciplinary effect as compared to that against the bureaucracy. Third, a bureaucracy, overly competent and congruent with each other, may hurt the government performance. Fourth, to foster incentives among its bureaucrats, a leader may tolerate factions while insist upon loyalty. Fifth, as a result, such a political system may adapt to public’s policy preference.  Finally, as compared to democracy, the political system trades off information and preference aggregation for better incentives of the government.


Keywords


Career Concerns, Selection Concerns, China