Essays in political economy and bureaucracy

Abstract

This thesis consists of three essays in political economy and bureaucratic organizations.

Chapter 1 studies the entry-level selection into public organizations. Exploiting a unique random assignment of administrators to counties in imperial China, we study how merit-based recruitment of managers affects government performance in multiple tasks. Combining personnel records and administrative archival data, we find that merit-recruited administrators through civil service exams (as opposed to other non-merit-based recruitment) performed better in public goods provision and tax collection, and were more likely to be recognized for their achievements by the local public. Evidence suggests that these administrators were associated with better management of subordinates. Examining their dual role as judges, we use criminal case data to show that cases judged by merit-recruited administrators had shorter durations, indicating enhanced judicial efficiency. Finally, merit-recruited administrators were less likely to come from elite families and have connections to incumbent top officials. Our results highlight the importance of competitive and open recruitment as a cornerstone of effective public organizations.

Chapter 2 focuses on the internal selection and appointment of middle-ranking officers. Public organizations are often characterized by rigid rules and procedures. Can discretion in personnel decisions improve governance performance? This chapter studies an organizational reform in China’s imperial bureaucracy that modified the appointments of certain prefecture-governorships from a rule-based process to a more discretionary method. We find that discretionary appointments improved public goods provision and led to greater state responsiveness. We provide evidence that a better selection of governors plays an important mechanism. Finally, we provide evidence suggesting that the benefit of discretion depends on the incentive alignment of decision-makers with the organization.

Chapter 3 moves beyond personnel issues and studies the allocation of authority between different layers of the organization. Centralized fiscal administration is considered important for building an effective fiscal state. However, centralizing fiscal authority may create scope for top-down encroachment between vertical levels of government and lead to negative unintended consequences. This chapter studies how a centralization policy aimed at monitoring local taxation affected fiscal capacity in imperial China. We exploit predetermined variation across counties in exposure to centralization that replaced local governments’ unsupervised autonomy in local revenues with transfers from provincial governments. Using newly collected administrative data on tax collection records, we find that centralization undermined fiscal capacity, evidenced by a large increase in tax revenue deficits. Evidence suggests that counties bypassed regulation by manipulating disaster reporting and requesting tax exemption. We provide evidence consistent with the mechanism of provincial encroachment on local revenues, which undermined the fiscal conditions of counties, thereby impairing administrative capacity or forcing them to embezzle central tax to maintain local expenditure. Finally, we show that centralization caused an increase in protests against taxation.