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

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 detrimental to government performance (non-performance-oriented government behavior, NPOGB). These latter behaviors are prevalent, especially in fiscally federalist contexts such as China. This study analyzes POGB and NPOGB and employs game theory to develop a theoretical model explaining the causes of NPOGBs in China and how inter-jurisdictional competition leads to them. The findings show: (1) POGB represents a Pareto-optimal condition but only a very small share of all government behaviors; most behaviors are NPOGBs. (2) Continuous and volatile NPOGBs persist because, under information scarcity and risk aversion, local officials rationally choose them and imitate each other to avoid losing in competition.

Huping Shang, Hongmei Liu, Wei Liu