Target Setting in Tournaments: Theory and Evidence from China. Issue 623 (20th May 2019)

• Record Type: Journal Article
• Authors: Li, Xing; Liu, Chong; Weng, Xi; Zhou, Li-An
• Is Part Of: Economic journal. Volume 129:Issue 623(2019)
• Page Start: 2888
• Page End: 2915
• Publication Date: 2019-05-20
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; 330.05
• DOI: 10.1093/ej/uez018
• Languages: English
• ISSNs: 0013-0133

Abstract

Abstract: 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.