Addressing Multitasking Problems through Promotion Incentives: An Empirical Study of Local Governments in China

Abstract

This study builds a theoretical framework on how subnational governments use promotion schemes to motivate local bureaucrats to address conflicting tasks of economic development and environmental protection. We argue that subnational (province) governments can strategically allocate polluting industries to border areas to make neighbors bear the social cost of pollution and use promotion incentives to make their subordinates (city leaders) comply. Hence, when the central government imposes a stricter environmental regulation policy on provincial governments, border-city leaders obtain a higher probability of promotion. Based on a panel dataset of leaders’ career information and administrations across cities in China, we find an increase in promotion probability for border-city leaders compared with their non-border counterparts after 2011 when the environmental protection task became more important. A potential channel is that border-city leaders accept the migration of polluting industries as a signal of compliance. In addition, this effect is more prominent for newly appointed leaders who have stronger political motivations and rely more on their superiors.