A model of tournament incentives with corruption

The institution that has enabled decades of rapid economic growth in China features lower-level government officials competing for promotion to a higher level by promoting local economic growth. Theoretically, this tournament-style promotion scheme calls for a convex wage scale to effectively elicit effort. However, the empirically observed public-sector pay scale is rather concave in China. We reconcile the theoretical prediction on the wage progressivity with its empirical counterpart by recognizing other implicit forms of incentives of rising to the top made possible by another institutional feature of China: the top-down disciplinary inspection.