Why Has China Been Able to Achieve a Sustained Phenomenal Growth Despite a Political Institution

Abstract

Why has China been able to achieve a sustained phenomenal growth despite a political institution free from checks and balances? An emerging popular answer is regional competition due to career concerns. According to the argument, the otherwise unaccountable government officials become enthusiastic in promoting economic growth, because beating their peer government officials in regional economic development will help themselves being promoted to a higher level of government offices. This paper expresses the view that, in a political institution free from checks and balances, nothing apparent are career concerns of government officials. First, in such a political institution, it is not only the accountability of government officials that matters, but more importantly, the accountability of the leadership, the very issue from which China's miracle arises. Second, a political institution like the one in China has a unique feature when it comes to the career concerns of government officials. That is, promotion leads to succession: the very future career of a government official is to become the leader, and hence career concerns, Beijing style.

The aforementioned observations prompt this study of bureaucrats' career concerns, leadership selection, and leadership accountability in particular, in a stylized overlapping generation model where a government leader selects his own successor from his bureaucrats in each period. In our model, the leader and his bureaucrats jointly supply public goods, and yet all may embezzle public resources to profit themselves, thus arising their accountability problem. We demonstrates a potential mechanism through which the leader may resolve his own accountability problem due to his attempt to select his own desired successor. The driving force behind our mechanism is that the leader's choice of action impacts the noise in his agents' performance and consequently his ability to identify his desired successor among these agents, as a corrupting behavior by the leader tends to waste the effort of his agents, whereas the honest civic service of his offers room for his agents to perform to their best potential. Despite the presence of this potential mechanism, we show that career concerns, Beijing style suffers from an inherent indeterminacy problem: for a wide parameter ranges, there co-exist a bad equilibrium where the entire government is corrupt alongside a good one. Even in a good equilibrium, we show that career concerns, Beijing style do not lead to a completely clean government. Moreover, we show that a leader’s intent to choose a competent successor does not necessarily translate into either bureaucrats’ career concerns or merit-based promotion.