IEA: Can you tell us what made you pursue a career in economics?

Huayu: I was born in a small village in Central China, a place less developed than most other areas in the country. While I witnessed substantial improvements in living standards as I grew up, I was astonished by the immense developmental gap between my home village and big cities once I had the chance to study in Beijing. Why do some regions tend to be more prosperous than others? What policies could help less developed regions such as my hometown to catch up? How should these policies be implemented? These are the questions that puzzled and intrigued me. They motivated me to study economics and to pursue a doctoral degree at the University of Michigan. As a graduate student, I learned to combine rigorous empirical methods with economic theory to analyze important questions related to policymaking and economic development. In collaboration with governments and firms in India and China, I have also implemented several randomized intervention programs targeting disadvantaged populations. After graduation, I was fortunate to be able to join the National School of Development and ISSCAD at Peking University. This is a platform which allows me to participate in policy debates in China, and share knowledge and experience with global leaders from other developing countries. I chose this career because it has allowed me to continue seeking answers to questions that I care about, and gives me a platform to make a real difference, not just to my small home village, but to the developing world as a whole.

IEA: You have done some very interesting research on the determinants of state and local policies in China (as in your work on allocation of industrial land). Can you tell us how this work reinforces — or forces us to rethink — conventional accounts of the Chinese economic development model?

Huayu: Conventional studies on China’s political economy tend to attribute China’s economic success to a performance-based promotion tournament between local government officials. This model assumes that the promotion of local officials is determined by economic growth in their retrospective jurisdictions. In addition, local officials are regarded as self-interested agents driven purely by career advancement incentives. As a result, they implement pro-growth policies and programs so as to compete for promotion. However, government officials do not operate in an institutional vacuum; they are embedded in a network of social relationships that may also shape their incentives and behaviors. Many recent studies have shown that in addition to career concerns, politicians and bureaucrats are motivated by social incentives. My recent work on the allocation of industrial land is an example of this. Using georeferenced data on each parcel of land supplied by Chinese local governments for industrial activities, coupled with detailed biographical data on local government officials, I provide evidence that local officials tend to shift industrial activities from areas upstream of their home regions to areas upstream of other regions. This protects residents of their hometowns from industrial pollution. However, it comes at the expense of economic efficiency and government income. These findings point to the importance of local officials’ social networks and non-pecuniary incentives in determining government policy. It is important to incorporate this into China’s development models since it explicates regional variations in policymaking and development. Given the prevalence of social network ties between upper- and lower-level government officials within the Chinese political arena, it may also be worth rethinking the meritocracy assumption about the promotion of local officials, as well as personnel policies that may improve the quality of bureaucrat selection.