The Economic Impact of China's Anti-Corruption Campaign

Abstract

We study how China's recent anti-corruption campaign affects local economies. Our identification is based on a staggered difference-in-differences design and county-month level variations in inspection visits. We find that inspection visits decrease business entries by 0.9% in registered capital, and the effect is concentrated on sectors susceptible to corruption, such as construction and infrastructure. Lands sold by local governments become 3.9% more expensive, mostly driven by non-market transactions. Car consumption decreases by 3.4%, which is homogeneous across price tiers. All effects persist for at least 12 months. The heterogeneous effects across different regions suggest different levels and forms of corruption.

Keywords: Corruption, Political Economy, China

JEL Classification: D73, P16, H70