Corruption as a natural resource curse: Evidence from the Chinese coal mining

Abstract

Research on the natural resource curse has been extended to the impact of natural resource abundance/dependence on institutional or governance quality, which includes corruption. This study investigates the impact of coal mining on local corruption in China. The findings show a positive association between coal output and corruption at the prefectural Party Secretary's level. Using the spatial band of 200 km radius and 100 km radius of individual coalmines aggregated at prefecture level as an instrumental variable, we establish the causality running from coal output to local corruption. A robustness check using court verdicts of all bribery cases in China indicate the same result, i.e., coal mining is conducive to local corruption at all levels. Furthermore, we show that the mechanism is not through demand side, i.e., corruption is not a consequence of economic boom around the coalmines but directly linked to the coal mining itself.