Target Setting in Tournaments: Theory and Evidence from China

By Xing Li, Chong Liu, Xi Weng, Li-an Zhou. Economic Journal, 2018

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Motivated by the prevalence of economic targets at all levels of territory administration in China, this article proposes a Tullock contest model to study optimal target setting in a multi-layered tournament-based organisation. In our model, targets are used by upper-level officials to convey the importance of economic growth and incentivise subordinates in the tournaments. Our model predicts a top-down amplification of economic growth targets along the jurisdiction levels, which explains the observed pattern in China. Using both provincial and prefectural-level data, we test the model predictions and find consistent evidence.

Subfields: Economics and Econometrics, Political Science and International Relations, Safety Research

View Paper: https://www.semanticscholar.org/paper/1f5d0e4f12365475d0f728f370cb84a83829e217