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The Distortionary Effects of Incentives in Government: Evidence from China's "Death Ceiling" Program

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  • Raymond Fisman
  • Yongxiang Wang

Abstract

We study a 2004 program designed to motivate Chinese bureaucrats to reduce accidental deaths. Each province received a set of "death ceilings" that, if exceeded, would impede government officials' promotions. For each category of accidental deaths, we observe a sharp discontinuity in reported deaths at the ceiling, suggestive of manipulation. Provinces with safety incentives for municipal officials experienced larger declines in accidental deaths, suggesting complementarities between incentives at different levels of government. While realized accidental deaths predict the following year's ceiling, we observe no evidence that provinces manipulate deaths upward to avoid ratchet effects in the setting of death ceilings.

Suggested Citation

  • Raymond Fisman & Yongxiang Wang, 2017. "The Distortionary Effects of Incentives in Government: Evidence from China's "Death Ceiling" Program," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 202-218, April.
  • Handle: RePEc:aea:aejapp:v:9:y:2017:i:2:p:202-18
    Note: DOI: 10.1257/app.20160008
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    1. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
    2. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
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    4. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
    5. Paul Oyer, 1998. "Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business Seasonality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 149-185.
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    8. Dixit, Avinash, 1997. "Power of Incentives in Private versus Public Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 378-382, May.
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    Cited by:

    1. repec:eee:deveco:v:131:y:2018:i:c:p:79-95 is not listed on IDEAS
    2. Alan Benson & Danielle Li & Kelly Shue, 2018. "Promotions and the Peter Principle," NBER Working Papers 24343, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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