Anticorruption and growth: Evidence from China

Abstract

This study investigates the relationship between anticorruption and economic growth by focusing on the anticorruption campaigns run by the Communist Party of China. To measure the intensity of the Party's anticorruption efforts, we count the number of articles from official newspapers that discuss corruption. We first show how our proxy compares with alternative measures. Using panel data of Chinese provinces, we then estimate using various methodologies the effect of anticorruption on growth, finding a negative impact. We also find that the detrimental effect upon growth results from lowering physical investment during the anticorruption campaigns. Our findings do not imply that governments should not try to lower corruption, but do suggest a cost of doing so.