Leniency, Asymmetric Punishment and Corruption: Evidence from China

Abstract

One-sided leniency policies and asymmetric punishment are regarded as potentially powerful anti-corruption tools, also in the light of their success in busting price-fixing cartels. It has been argued, however, that the introduction of these policies in China in 1997 has not helped fighting corruption. Following up on this view, the Central Committee of the Chinese Communist Party passed on 23 October 2014 a Decision concerning Several Major Issues in Comprehensively Advancing Governance According to Law which stressed the current government’s strong commitment to fight corruption introducing heavier penalties, including death penalty, but also severe restrictions of leniency offered to bribe-givers. Claims on the effects of the 1997 reform are not backed by data, to our knowledge, while evaluating the effects of a policy on crimes like corruption is difficult. These crimes are typically only observed if detected and convicted by the police, and an increase in observed convictions may as well be due to an increase in the total number of crimes rather than to a positive effect of the policy. We collect data on the investigations of bribery and public official corruption, available for most Chinese provinces for the period 1986-2010, and extend to corruption a method to identify deterrence effects from changes in detected cases, originally developed for cartels. The available evidence so far points to a substantial and stable reduction in the number of major corruption cases around the 1997 reform, a result per se ambiguous but clearly consistent with a positive deterrence effect of the 1997 reform. A case study analysis is under way to corroborate and help the interpretation of these preliminary findings.