Unveiling the origins of non-performance-oriented behavior in China’s local governments: a game theory perspective on the performance-based promotion system

Abstract

Performance evaluation has great potential to encourage government officials to improve their behavior (performance-oriented government behavior, POGB), but it also tends to lead to behaviors that are detrimental to government performance (non-performance-oriented government behavior, NPOGB). The latter behaviors are prevalent in many parts of the world, especially in areas with fiscal federalist characteristics such as China. This study analyzes POGB and NPOGB and employs game theory to develop a theoretical model to explain the causes of NPOGBs in China, exploring how competition among different jurisdictions leads to them. The findings show that (1) POGB is a condition of Pareto optimality in government behavior, but only represents a very small share of all government behaviors. The majority of behaviors can be categorized as NPOGBs. (2) The primary reason continuous and volatile NPOGBs persist is that, from the perspective of local officials operating under the constraints of information scarcity and risk aversion, they are rational choices, and officials have to imitate one another’s behaviors so as not to be defeated in the competition with others.