The unintended consequences of Yuan’e reform in China

Abstract

 Judges are often regarded as representatives of legal order and symbols of social equity and justice. However, judges are also influenced by a certain degree of “rationality”, or self-interest. This dissertation uses the Yuan’e reform in mainland China as a quasi-natural experiment to empirically explore how performance incentives shape judges’ judgements. It was found that, in a multi-tasking performance assessment environment, the high-powered incentives created by performance appraisals would, on the one hand, promote diligence on the part of judges, but on the other hand, lead to results unexpected by policymakers – judges would tend to conclude cases by mediation rather than issue verdict in order to increase the efficiency and case close rate. The regression results show that the implementation of Yuan’e reform significantly increased mediation rates in civil cases. This effect was also more prominent in cases at trials of first instance, cases where the litigants are natural persons, cases where the trial court is a local court, and when the court is located in a region with greater fiscal resources. This dissertation also found that, although the Yuan’e reform has averagely improved the efficiency and quality of judgement in civil case, this was achieved in some part at the expense of lowering the quality of judgments in mediation cases. Performance assessments to become a quota judge created excessive competition incentives for judges, distorting the objective, fair judicial stance to which they should adhere and causing them to selectively conclude cases through mediation. To some degree, judges’ strategic behavior is detrimental to the attainment of judicial impartiality.