Seminar Vol. 170

Title: A Model of Tournament Incentives with Corruption

Speaker: Yu Zheng, Queen Mary University of London

Time: July 16th, 2019 13:30–15:00

Venue: Conference Room 106B, Zhonghui Building (IESR, JNU College of Economics)

About the speaker:

Yu Zheng joins QMUL as a Lecturer in Economics from City University of Hong Kong, where she is an Assistant Professor (on leave).

Her research areas are macroeconomics, development and labour economics. Her current research focuses on the economic development in China, in particular the cause and consequences of income inequality and policies of poverty reduction. More generally, she does theoretical and empirical work on economic growth, paying special attention to the aggregate implications of micro-level risks.

She received her Ph.D. in economics from Washington University in St. Louis and was a Max Weber Fellow at the European University Institute in Florence.

Abstract:

We provide a theory of how growth, corruption, and a low-powered public-sector pay scale coexist in a stable equilibrium in the early stage of China’s development. The regionally decentralized authoritarian regime of China features lower-level government officials competing for promotion to a higher level in the government by generating local economic growth, and calls for high-powered incentives to elicit effort from the officials. However, this is at odds with the generally low-powered public-sector pay scale in China. We propose a principal-agent model, where the principal represents the Chinese people’s desire to pursue economic growth and the agents are the government officials delegated with production tasks and organized in a tournament, to address how a low-powered pay scale can effectively elicit effort in a tournament infested with widespread corruption.