Political promotion incentives and local employment

Abstract

This study examines the influence of local officials’ promotion incentives on the employment rate. Using panel data at the city level in China, we find that the promotion incentives of local officials can improve the local employment rate. We further identify the causal relationship using natural disasters as the instrumental variable. We also show that local officials mainly improve the employment ratio of the secondary industry to improve their performance in the political promotion period quickly and effectively. In addition, our findings are significantly moderated by the level of local marketization and city size as measured by population. Overall, this study sheds new light on the political factors that affect employment such that higher-level governments should construct reasonable performance appraisal mechanisms and seek to perfect the market competition environment.