Minimum Performance Targets, Multitasking and Incentives: Theory and Evidence from China’s Air Quality Controls
Fri, 9 April, 2021
9:30am - 11:00am
Friday, April 9, 2021
9:30 a.m.-11 a.m. EDT
via Zoom
The Institute for International Economic Policy is pleased to invite you to the 13th annual Conference on China’s Economic Development and U.S.-China Economic Relations. This year, the conference will take place as a virtual series. This conference is co-sponsored by the Sigur Center for Asian Studies and the GW Center for International Business Education and Research.
As the world’s largest emitter of carbon dioxide, China has launched serious efforts to tighten its environmental regulation and curb air pollution in the past decade. A distinctive feature of Beijing’s approach is the critical role played by local governments in complying with central directives. China’s local officials are currently facing the dual tasks of pursuing local economic development and curbing air pollution, which are potentially conflicting with each other. To resolve this multitasking challenge, China has recently introduced minimum targets for air quality controls to discipline local officials while continuing to link their promotion prospects to local economic performance (such as GDP growth).
In the event, Peking University’s Li-An Zhou discussed how local Chinese officials respond strategically to minimum air quality control targets when they care more about pursuing regional economic development, which is closely linked to their career prospects. Using a novel prefecture-day-level dataset on air quality, Zhou finds strong evidence that air quality tends to improve when the air quality target is doomed to fail, but deteriorates significantly after the early fulfillment of the target is guaranteed. These “asymmetric” strategic responses are mainly driven by “outsiders” – local officials with no previous exposure to the regions to which they are assigned. Greater pressure to promote local economic development reinforces outsiders’ asymmetric responses. For “non-outsiders” who have been promoted from the local area and who are more likely to intrinsically value the local environment, air quality performance is stable in both cases of target fulfillment. The study sheds light on how minimum air quality targets have worked in China’s context and highlights the role of intrinsic motivations in mitigating strategic responses to minimum performance targets in a multitasking environment.
JHU’s Matthew Kahn served as a discussant and IIEP Co-Director Jay Shambaugh served as a moderator, with a brief introduction from IIEP’s Chao Wei.
Co-sponsors:
Sigur Center for Asian Studies and the GW Center for International Business Education and Research.
Meet the Speakers:
Li-An Zhou is is Professor of Economics and Associate Dean of Guanghua School of
Management at Peking University. He received his Ph.D. in economics from Stanford
University. His research interests include political economy, industrial organization,
economic development, and Chinese economy. Dr. Zhou has published papers in
leading international journals of economics and management including American
Economic Review, Review of Economics and Statistics, Economic Journal, Journal of
Public Economics, Journal of Development Economics, and Strategic Management Journal.
Meet the Discussant:
Matthew E. Kahn is the Bloomberg Distinguished Professor of Economics and Business at Johns Hopkins University and the Director of JHU’s 21st Century Cities Initiative. He is a research associate at the National Bureau of Economic Research and a research fellow at IZA. He has taught at Columbia, the Fletcher School at Tufts University, UCLA and USC. He has served as a Visiting Professor at Harvard and Stanford and as the Low Tuck Kwong Distinguished Visiting Professor at the National University of Singapore. He is a graduate of Hamilton College and the London School of Economics. He holds a Ph.D. in Economics from the University of Chicago. He is the author of Green Cities: Urban Growth and the Environment (Brookings Institution Press 2006) and the co-author (joint with Dora L. Costa) of Heroes and Cowards: The Social Face of War (Princeton University Press 2009). He is also the author of Climatopolis (Basic Books 2010) and Blue Skies over Beijing: Economic Growth and the Environment in China (joint with Siqi Zheng published by Princeton Press in 2016). He has also published three other Amazon Kindle books on urban economics and microeconomics. His research focuses on urban and environmental economics.
Meet the Moderators:
Jay Shambaugh is Professor of Economics and International Affairs, and Co- Director of the Institute for International Economic Policy at the Elliott School of International Affairs, George Washington University. His area of research is macroeconomics and international economics. He has had two stints in public service. He served as a Member of the White House Council of Economic Advisors from 2015-2017. Earlier, he served on the staff of the CEA as a Senior Economist for International Economics and then as the Chief Economist. He also spent 3 years as the Director of the Hamilton Project at the Brookings Institution. Jay is also a Faculty Research Fellow at the NBER and Non-Resident Senior Fellow in Economic Studies at Brookings. Prior to joining the faculty at George Washington, Jay taught at Georgetown and Dartmouth and was a visiting scholar at the IMF. He received his Ph.D. in economics from the University of California at Berkeley, an M.A. from the Fletcher School at Tufts, and a B.A. from Yale University.
Chao Wei received her PhD in Economics from Stanford University in 2001. She also holds an MA in economics from Columbia University and a BA in economics from Fudan University in China. She worked at the University of North Carolina at Chapel Hill for two years before joining the George Washington University in 2003. Her research interests focus on the intersection of macroeconomics and financial economics, with an emphasis on the asset pricing implications of production economies with and without nominal rigidities. Her current research examines the impact of personal and corporate income taxes on asset returns. She teaches undergraduate and graduate courses in Money and banking, and Macroeconomic Theory.