Capability and opportunism: Evidence from city officials in China

Tianyang Xi^a, Yang Yao^a, Muyang Zhang^b

a National School of Development and CCER, Peking University, China

b China Public Finance Institute and School of Public Economics and Administration, Shanghai University of Finance and Economics, China

ABSTRACT

Opportunism is prevalent in political competition and public policy making. This paper investigates how opportunism is mitigated by capabilities among city leaders in China. Taking advantage of China’s institutional setup with ample bureaucratic transfers, the paper estimates leaders’ capabilities as their personal contributions to local economic growth. The paper finds strong evidence of political business cycles – a typical form of political opportunism – as manifested by a significant boost in the growth rate preceding the Communist Party’s national congress. However, more capable leaders are found to generate more modest political business cycles than less capable ones do. The findings suggest that, to the extent that political selections are associated with the long term reputation of officials, career-concerned opportunism is at least partially moderated by the selection of capable officials in China. The paper provides supportive evidence for the reputation model of political business cycles as well as enriches the study of government officials in weak institutional environments.

Keywords

Political business cycles   Opportunism   Capability versus incentive

JEL classification

H11 O47 P26