Determinants of corruption in China: a policy perspective

Abstract

The main objective of this study is to investigate the major determinants for corruptions in the People’s Republic of China (hereafter China) using provincial panel data from 1998 to 2012 through the fixed effects and Instrumental Variables (IV) method. This paper uniquely considers the impacts of economic policy uncertainty on corruption in China. The study identified that the level of corruption has a positive relationship with the factors such as Foreign Direct Investments (FDI), uncertainty, economic development, public sector employees, size of provincial population and income inequality. And it was found that corruption has no correlation with salaries of public employees, women’s enrollment, anticorruption efforts, technological development, media and education. The study suggests that women’s enrollment is pretty unique, which depresses corruption in China. Further, it reveals the impact of technological development to reduce the rent-seeking activities. This study shows that there is a positive relationship between uncertainty and the level of corruption. The increase of uncertainty would lead to distract economic agents and economic drivers. The study suggests initiating serious economic and political reforms, since the level of corruption marginally decreases the economic growth of the country. Further, it emphasizes that the necessity of a regular framework to know how and why corruption saturates on the pillars of the state to succeed in anti-corruption policies.