Political uncertainty, leadership and productivity

Abstract

We investigate the impact of political uncertainty in the context of the upper echelon theory. Using provincial-level data of political leaders in China over the period 1995–2015, we take a two-step approach to first examine the impact of top leader teams’ (TLTs) traits on productivity and, second, to test if such leadership effects vary with political uncertainty. We find that TLTs’ education, generally a driving force behind productivity, is less effective during the period of high political uncertainty. TLTs’ work experience positively contributes to productivity, which is strengthened under high political uncertainty. TLTs’ career ambition leads to higher productivity, but such an effect attenuates when political uncertainty is high. Finally, TLTs’ political positions negatively contribute to productivity and the effect is barely affected by political uncertainty, suggesting a disconnection between political positions and economic outcomes.

Keywords:

• Political uncertainty
• leadership
• productivity

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The TP represents the shift of the production frontier, while the TE change represents the rate at which a producer moves towards or away from the production frontier. The TFP growth is derived residually as a measure of output growth that cannot be accounted for by input growth (note that for simplicity, the paper uses the TFP for the TFP growth).

2 From the perspective of development and political factors, China is divided into four major areas: municipalities, and the eastern, central, and western regions. Municipalities include Beijing, Tianjin, and Shanghai. Chongqing is included in Sichuan province due to the lack of data; the eastern region includes Hebei, Liaoning, Jiangsu, Zhejiang, Fujian, Shandong, and Guangdong; the central region consists of Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, and Hunan; and the western region includes Inner Mongolia, Guangxi, Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang. Hainan province and Tibet are excluded due to incomplete data.

3 Hainan and Tibet are excluded due to incomplete data.

4 For more information, please see https://www.policyuncertainty.com/china_monthly.html.

5 We obtain all the yearbooks from 1995 to 2015 to align with the sample period.

6 See Hu and Khan (1997).

Additional information

Funding

This research is supported by the National Natural Science Foundation of China [Grant No. NSFC-71363014].