From past lies to current misconduct: The long shadow of China's Great Leap Forward

Abstract

Using hand-collected data on yield over-reporting during China's Great Leap Forward (GLF) period, we find that GLF over-reporting in a chairperson's province of origin strongly predicts corporate financial misconduct today. Evidence from a variety of identification strategies establishes a causal relationship. We also extend our analyses to other aspects of corporate misconduct and local dishonest behaviors. We show that GLF over-reporting has shifted social norms toward a present-day tolerance for dishonesty. Our findings suggest that wrongdoings by local government officials in the past can lead to adverse effects on people's future behavior in the form of cheating.