The Effects of Political Institutions in China: Evidence from the Mandatory Retirement Age at the Provincial Level

Abstract

This study takes advantage of a “natural experiment” to show how changes in political institutions shape politicians’ incentives, and in turn affect important policy outcomes in China. Beijing introduced the mandatory retirement age for provincial leaders in the 1980s, but it did not fully institutionalize the new rule across all provinces until 2000. I therefore use this window to construct a difference-in-differences research design. Based on data from 1978 to 2005, I find that the enforcement of mandatory retirement rule does lead to better development outcomes. Provincial leaders who are eligible for promotion are now motivated to perform better on growth and social welfare provision in order to succeed under the performance-based promotion system. But the evidence also suggests that the mandatory retirement rule results in poorer performances among lame-duck leaders who have no chance for further promotion but to retire soon due to the age restriction. I also find that, contrary to what we expect, provincial leaders with central connection tend to have worse performances on growth. This finding shows that when politicians have connection with the center, they hold the key to promotion already. As a result, they do not need to worry about competing with others under the Chinese model of yardstick competition.