Performance Incentives and Economic Growth: Regional Officials in Russia and China

Abstract

Scholars of performance incentives for regional officials in transitional states debate the appropriate degree of centralization and decentralization of political control. Decentralized administrative systems are said to encourage beneficial jurisdictional competition among regional officials, inducing innovation and growth, and reducing the likelihood of predation by central officials. An alternative perspective holds that centralization enables central governments to set overall policy goals, selectively rewarding regional officials who meet them, and restraining local predation. In this paper, we argue that the key to an effective incentive system lies in the way centralization and decentralization are combined. To investigate this issue, we compare the performance, careers and incentives of regional officials in China and Russia during the last 15 years. Both countries combine centralized personnel selection with substantial administrative autonomy for regional officials, but differ substantially with respect to economic outcomes. We argue that the difference in outcomes can be attributed to a number of organizational features of the two systems that make performance-based evaluations more difficult in Russia than in China. In particular, we find that in contrast to China, provincial leaders in Russia are unlikely to be promoted for performance, have a lower turnover, are almost never transferred from one region to another, have less experience in executive positions, are more likely to come from the region they govern than their Chinese counterparts, and are not encouraged to show initiative in economic policy making.