Title

Information Distortion in Hierarchical Organizations: A Study of China’s Great Famine

Author(s)

Ziying Fan Ziying Fan (Shanghai University of Finance and Economics)

Wei Xiong Wei Xiong (Princeton University)

Li-An Zhou Li-An Zhou (Peking University)

Abstract

The literature has attributed China's Great Famine of 1959-1961 to sharp declines in grain output caused by reduced peasant incentives and excessive grain procurement. We provide evidence to further connect these failures to information distortion inside the government system. Specifically, we document the following findings. First, local officials competed with each other in massive inflation of local grain yield in an effort to cater to Mao's wishful thinking about the Great Leap Forward. Second, as a result of the inflated yield inflation, the central government failed to realize the widespread famine and organize systematic famine relief until two years after the famine started. Third, during the first two years, the central government transferred a substantial amount of grain out of the provinces that experienced severe famine while local officials in these provinces redistributed grain back to peasants using locally controlled grain stock. By revealed "knowledge," the last finding illustrates the information gap between the central government and local officials at the peak of the famine. Overall, our analysis highlights severe consequences of information distortion induced by subordinates' incentives to cater to their superior's wishful thinking.

Creation Date

2016-02

Section URL ID

Paper Number

2016-8

URL

http://wxiong.mycpanel.princeton.edu/papers/Famine.pdf

File Function

Jel

D83, D89, N95

Keyword(s)

China, Great Famine of 1959-1961, Information Distortion

Suppress

false

Series

13