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Why Did Wuhan’s Officials Respond Slowly to the Spread of the Coronavirus?
Thursday, March 5, 2020 6:45
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My short answer is “benchmarking”. In this age of ubiquitous Big Data, how do we benchmark whether a given urban leader is doing a “good job” when imputing a counter-factual is very difficult?
China’s urban leaders compete against each other to be promoted within the Chinese Communist Party.In the early years, they competed with respect to urban economic growth.The leaders of cities featuring a greater economic growth rate were more likely to be promoted in this tournament. In recent years, “green criteria” such as air pollution reductions and energy intensity of the economy have been introduced as performance criteria. In a series of papers, Siqi and I have documented that these new criteria do correlate with ex-post promotion probabilities.This indicates that mayors have incentives to address these environmental issues. Read our 2014 paper and our 2017 paper.
The horrible costs that China has suffered from the Coronavirus had me asking myself whether our political theme was incorrect. In the Coronavirus case, the Wuhan leadership was slow to tackle the issue. Why? I now have a hypothesis for explaining this sad fact.
In the case of the Coronavirus a key baseline counter-factual issue arises.As the contagion in Wuhan started, a Wuhan Mayor might have said to himself; “My area is suffering while my rivals’ areas have no cases.If I report this disease to the Beijing central government it will look like I am panicking and I will not be promoted and my rivals will be.” Note that this is a “difference in difference” estimator. In this tournament, Wuhan is not performing well with respect to Coronavirus cases relative to rival cities. These rival cities (back in January 2020) have no cases at all. But, this isn’t the right comparison.
The right counter-factual baseline would have been;“Under a business as usual path; how many people will die versus if I take stringent action now how many fewer people will die?”Since this counter-factual baseline cannot be estimated, the mayor was not rewarded in this tournament for excess caution. The baseline instead was other cities and they had 0 cases.
I believe this benchmarking challenge is a general point.
Benchmarking “relative performance” can yield bad outcomes when the other cities do not represent a valid control group for the treated entity. Since Wuhan has no “twin”, benchmarking Wuhan to other cities is not a valid comparison. Since the Wuhan leaders want to be promoted and know the promotion criteria (that involves benchmarking relative to other cities), this introduces perverse incentives for their early effort.
