“Career Concerns, Beijing Style” by Kim Sau Chung
Economics Seminar
Authors:
Kim Sau Chung
University of Minnesota and Chinese University of Hong KongJiahua Che
Chinese University of Hong KongKim Sau Chung
University of Minnesota and Chinese University of Hong Kong
We study a model of overlapping principal-agent problems, where one of yesterday's agents would be selected/promoted as today's principal, who then wields absolute power free of checks and balances, and has discretion over how to select/promote one of today's agents as tomorrow's principal. We use this model to theorize how a political system building on career concerns instead of checks and balances may function. We call this a model of career concerns, Beijing style, which differs fundamentally from one of career concerns, Holmström style, in that the disciplinary effect of career concerns exhibits inherent indeterminacy. The proper functioning of such a political system also relies on strong enough state capacity and an intermediate level of decentralization. Small improvement in the rule of law or a mandatory merit-based promotion rule may inadvertently render such a political system unworkable.
