The Price of Probity: Anticorruption and Adverse Selection in the Chinese Bureaucracy

Abstract

Fighting corruption is often seen as a crucial step toward building better institutions, but how it affects political selection remains less well understood. We argue that in systems where corruption functions as an informal incentive for government to attract talent, anticorruption initiatives that curb rent-seeking opportunities may unintentionally weaken both the quality and the representativeness of the bureaucracy. We test this argument in China using an original nationwide survey of government officials and an identification strategy that exploits exogenous variations in enforcement levels created by the recent anticorruption campaign. We find that intensified enforcement has generated two potentially negative selection effects: a deterrence effect that lowered the average ability of newly recruited bureaucrats, and a compositional effect that discouraged the entry of lower class individuals in favor of those who are affluent and well connected. These findings highlight important hidden human capital costs of corruption elimination in developing countries.

Keywords: anticorruption, political selection, political economy, China