The congruence of dual gaps in economic growth on regional sustainability

Abstract

The pursuit of economic development poses substantial environmental challenges, and achieving both economic and sustainable development are difficult goals to balance. Based on China’s unique political structure, government officials serve as central decision-makers in regional development. The policy choices of these officials are constrained by the official promotion tournament system. We examined the impact of gaps in the economic development goals of Chinese prefecture-level city governments on the sustainable development of regions using panel data for Chinese cities from 2003 to 2019. We analyzed the (in)congruence of the following two gaps: 1) the gap between the economic development of a city in the current and previous year, and 2) the gap between the average economic growth rate of other cities in the same province and the actual economic growth rate of a city. The results show that when there is incongruence between these two gaps (e.g., economic development surpasses expectations but falls short of the provincial average), green innovation within the region increases considerably. Our study integrates resource allocation theory and promotion tournament theory, expanding the boundaries of the theory of promotion tournaments for officials and the examination of motivations for green innovation. In addition, our findings not only benefit the Chinese government but also provide insights for governments worldwide to rationally allocate resources toward a cleaner and more sustainable future.