Career concerns and multitasking local bureaucrats: Evidence of a target-based performance evaluation system in China

Abstract

This paper examines whether a target-based performance evaluation system can properly motivate local bureaucrats to implement an environmental regulation policy at the cost of slow economic growth. In late 2005, the Chinese central government made cutting sulfur dioxide (SO2) emissions the main performance evaluation criterion for prefectural city mayors and Party secretaries. Using a difference-in-differences framework, we find that the performance evaluation system caused a significant decrease in SO2 emissions, as well as in the GDP growth rate. Our mechanism analyses further corroborate that local bureaucrats in Two Control Zone cities were willing to trade off GDP growth to achieve the more stringent emissions reductions goal. Our findings contribute to the understanding of multitasking agency problems for government agents.