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The effects of institutionalization in China: A difference-in-differences analysis of the mandatory retirement age

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  • Liu, Derek Tai-wei

Abstract

This study takes advantage of a “natural experiment” to show how institutionalization shapes economic outcomes in China. Beijing introduced the mandatory retirement age for provincial leaders in the 1980s, but the rule was not enforced across all provinces until 2000. I use this window to construct a difference-in-differences design and show how the enforcement of mandatory retirement rule leads to better economic outcomes. Provincial leaders eligible for promotion are now motivated to perform better on growth in order to succeed under the performance-based promotion system. But this institution is not perfect, as it results in poorer performances among lame-duck leaders near the retirement age. I also find that leaders with central connection tend to have worse performances. This suggests that when politicians have connection with the center, they hold the key to promotion already, so they do not need to worry about the Chinese-style yardstick competition.

Suggested Citation

  • Liu, Derek Tai-wei, 2018. "The effects of institutionalization in China: A difference-in-differences analysis of the mandatory retirement age," China Economic Review, Elsevier, vol. 52(C), pages 192-203.
    • Handle: RePEc:eee:chieco:v:52:y:2018:i:c:p:192-203
    DOI: 10.1016/j.chieco.2018.07.005
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    More about this item

    Keywords

    China; Institutionalization; Mandatory retirement; Growth; Career incentives;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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