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Target Setting in Tournaments: Theory and Evidence from China

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  • Xing Li
  • Chong Liu
  • Xi Weng
  • Li-An Zhou

Abstract

Motivated by the prevalence of economic targets at all levels of territory administration in China, this article proposes a Tullock contest model to study optimal target setting in a multi-layered tournament-based organisation. In our model, targets are used by upper-level officials to convey the importance of economic growth and incentivise subordinates in the tournaments. Our model predicts a top-down amplification of economic growth targets along the jurisdiction levels, which explains the observed pattern in China. Using both provincial and prefectural-level data, we test the model predictions and find consistent evidence.

Suggested Citation

  • Xing Li & Chong Liu & Xi Weng & Li-An Zhou, 2019. "Target Setting in Tournaments: Theory and Evidence from China," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2888-2915.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:623:p:2888-2915.
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    File URL: http://hdl.handle.net/10.1093/ej/uez018
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