Promotion incentives in the public sector: evidence from Chinese schools

Abstract

The authors provide the first evidence that promotion incentives influence effort of public employees by studying China’s system of promotions for teachers. Theoretical predictions from a tournament model of promotion incentives are tested using panel data on primary and middle school teachers. Consistent with theory, promotions are associated with wage increases, higher wage increases are associated with higher effort, and teachers increase effort in years leading up to promotion eligibility but reduce effort if they are repeatedly not promoted. Evaluation scores are positively associated with time spent on teaching and with student test scores, diminishing concerns that evaluations are manipulated