FINTECH THRUST SEMINAR | No Fish in Too Clean Water: Demystifying the GDP Manipulation in China
Supporting the below United Nations Sustainable Development Goals:支持以下聯合國可持續發展目標：支持以下联合国可持续发展目标：
No Fish in Too Clean Water: Demystifying the GDP Manipulation in China
Abstract:
Numerous studies suggest that China's GDP statistics have been subject to manipulation by local officials. This paper offers a novel perspective on why such manipulative behavior might be tolerated by the central government and under what conditions this tolerance may change. We develop a theoretical model treating data manipulation as costly falsification and analyze the optimal contract design within a moral-hazard framework. Our findings indicate that the optimal design permits some manipulation to balance the dual objectives of incentivizing agents and screening real output. Furthermore, in equilibrium, manipulation exhibits a non-monotonic relationship with its costs, with a rise in manipulation costs potentially leading to a higher level of manipulation when doing so can incentivize the agent to exert effort. We then empirically test our model’s predictions in the context of China's GDP manipulation and find supporting evidence consistent with our theoretical framework.
Xi Weng received his PhD degree in economics from the University of Pennsylvania in 2011. Prior to that, he received his bachelor and master degrees from Peking University, in 2004 and 2006, respectively. He is currently a tenured professor at Guanghua School of Management, Peking University. His research focused on microeconomic theory, in particular, game theory, information economics and digital Economy. His research has been published or accepted in top journals such as American Economic Review, Journal of Finance, Management Science, American Economic Journal: Microeconomics, Economic Journal, Journal of Economic Theory, International Economic Review, and Rand Journal of Economics.