The Pitfalls of a Centralized Bureaucracy

Chenggang Xu ()
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Chenggang Xu: Cheung Kong Graduate School of Business, China

Acta Oeconomica, 2019, vol. 69, issue 1, 1-16

Abstract: The incentive problem is a vital issue in all transition economies and China is not an exception. This paper summarises how China partially solved this problem at early stages of post-Mao reforms and why the Chinese solution is only transitory, which explains severe problems that China is facing now. The paper also discusses the incentive mechanisms in the judicial system and the effect of the soft budget constraint (SBC) syndrome on incentives, including the relationship between institutions and innovation.

Keywords: incentives; bureaucracy; Chinese economy; soft-budget constraints; R&D; law enforcement; incomplete law (search for similar items in EconPapers)
JEL-codes: D02 D73 G20 G30 H70 K20 K29 O30 P30 (search for similar items in EconPapers)
Date: 2019
Note: Based on the speech for receiving the 2016 China’s Economics Prize.
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Citations: View citations in EconPapers (3)

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