Incentivized Inequality: Career Incentives and Investment Allocation in China

Bureaucratic career incentives play a critical role in shaping how government officials influence local resources within their jurisdictions. This study suggests that the career incentives of subnational officials are instrumental in determining whether the government manages resources in a manner that either mitigates or exacerbates regional inequality in localities. Using a unique dataset of Chinese provincial officials from 1995 to 2019, this study measures an official's career prospects as a predicted probability of promotion. The empirical results demonstrate that Chinese provincial governments were likely to promote more investments and channel them into wealthier sub-regions when composed of a greater proportion of officials facing intense competition. On the other hand, a higher proportion of provincial officials who had reached the end of their careers prompted the government to prioritize poorer sub-regions. Interestingly, political rising-stars, whose career prospects are significantly higher than others, promoted less investment because they are risk-averse and prefer to maintain their current status.