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A Model of Tournament Incentives with Corruption

Bin Wang () and Yu Zheng

No 872, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We provide a theory of how growth, corruption, and a low-powered public-sector pay scale coexist in a stable equilibrium in the early stage of China's development. The regionally decentralized authoritarian regime of China features lower-level government officials competing for promotion to a higher level in the government by generating local economic growth, and calls for high-powered incentives to elicit effort from the the officials. However, this is at odds with the generally low-powered public-sector pay scale in China. We propose a principal-agent model, where the principal represents the Chinese people's desire to pursue economic growth and the agents are the government officials delegated with production tasks and organized in a tournament, to address how a low-powered pay scale can effectively elicit effort in a tournament infested with widespread corruption.

Keywords: Institution; Tournament; Corruption; China (search for similar items in EconPapers)
JEL-codes: D73 J45 O43 P26 (search for similar items in EconPapers)
Date: 2018-10-01
New Economics Papers: this item is included in nep-cna, nep-hrm, nep-lma and nep-tra
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