Career Incentives and Short-Termism Among Local Leaders

Policies that prioritize short-term gains over long-term vision and planning often result in unintended socioeconomic consequences. Therefore, investigating the underlying factors that contribute to this short-term focus in public decision-making is crucial. This study enhances the existing literature by developing and empirically testing a theoretical framework that links career incentives to the short-termism of local leaders in China. Specifically, we examine how individual and organizational-level factors influence career motivations, leading local leaders to adopt a myopic perspective that favors immediate and visible policy initiatives. Utilizing automated text analysis on a dataset of over 4,000 annual work reports from Chinese city governments between 2004 and 2019, we introduce a novel indicator to quantify the short-termism of local leaders. Our empirical findings reveal an inverted-U-shaped relationship between the age of local leaders and their short-termism prior to 2013-the year Xi Jinping assumed the presidency of China. Additionally, we find that an increase in the span of control-the number of cities managed by a province-is associated with heightened short-termism among local leaders throughout the entire observation period. These findings provide valuable insights into the dynamics of local government decision-making and its potential implications for societal outcomes, highlighting the importance of aligning career incentives with long-term governance goals.