“Competence versus Incentive: Evidence from City Officials in China” by Prof. Yang Yao
The Shanghai University of Finance and Economics
This paper empirically studies the roles of competence and incentive in affecting the performance of public officials. We aim at answering two questions: Does competence or incentive matter more for economic performance? Do they tend to substitute or complement for each other? Using a unique dataset of Chinese city officials for the period 1994-2011, we estimate each official's relative level of competence to promote economic growth and identify the effects of incentive using age limits and political cycles for promotion. We find that both competence and incentive matter for officials' economic performance, but competence explains more than incentive. In addition, incentive matters less for more competent officials. Our results show that competence is more important than incentive to affect politicians' economic performance.