Linking anticorruption threats, performance pay, administrative outputs, and policy outcomes in China

Abstract

Little is known about the effects of two prominent public sector reforms—anticorruption efforts and high‐powered incentive systems—on the accomplishment of policy goals in the absence of the rule of law and in the presence of an extrinsic incentive to take advantage of corruption to achieve performance targets. This study explores how performance rewards and anticorruption efforts jointly affect administrative outputs and policy outcomes. We examine China's air pollution control policy with province‐level panel data. The analysis shows that performance rewards prompt administrative outputs that are linked to the incentive structure. Anticorruption activities have small significant, positive effects on those outputs only prior to the inception of high‐powered rewards, but have no significant effect on policy outcomes, regardless of the measure. The introduction of performance incentives contributes to the achievement of policy outcomes only when their measurement is subject to government manipulation.