Political_turnover_and_economic_performance-the_incentive_role_of_personnel_control_in_China.pdf

Journal of Public Economics 89 (2005) 1743– 1762 /locate/econbase Political turnover and economic performance: the incentive role of personnel control in China Hongbin Lia,*, Li-An Zhoub aDepartment of Economics, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong, P.R. China b Guanghua School of Management, Peking University, P.R. China Received 14 May 2003; received in revised form 23 June 2004; accepted 23 June 2004 Available online 27 September 2004 Abstract In this paper, we provide empirical evidence on the incentive role of personnel control in post- reform China. Employing the turnover data of top provincial leaders in China between 1979 and 1995, we find that the likelihood of promotion of provincial leaders increases with their economic performance, while the likelihood of termination decreases with their economic performance. This finding is robust to various sensitivity tests. We also find that the turnover of provincial leaders is more sensitive to their average performance over their tenure than to their annual performance. We interpret these empirical findings as evidence that China uses personnel control to induce desirable economic outcomes. Our study adds some basic evidence to a growing theoretical literature emphasizing the role of political incentives of government officials in promoting local economic growth. D 2004 Elsevier B.V. All rights reserved. JEL: H11; H7; J63; P3 Keywords: Political turnover; Economic performance; Personnel control 1. Introduction In the course of China’s remarkable economic growth since the late 1970s, local government officials have been playing an active role in building local infrastructure, * Corr