Anti-corruption and Domestic Investment: A DID Analysis of Chinese Provinces

• In Event: Poster Session: Division 13 Politics of (former) Communist Societies

Abstract

Chinese Chairman Xi’s anti-corruption activities have brought great transformations to Chinese politics. Though being criticized as a tool of clearing political enemies, these actions have (at least partially) achieved the goal of eliminating corruptive officials.

However, accompanying the reduction of corruption, we observe a decrease in the domestic investments’ growth speed. This decrease is against the assumptions in traditional developmental economics that corruption will harm investment growth, and it worth researching.

In this paper, we aim at studying the influence of anti-corruption activities on domestic fixed assets investments. We will construct a dataset from 2007 to 2018 with monthly and quarterly investment statistics of Chinese provinces, the xunshi (巡视) times of different areas, the frequency of overall corruption lawsuits, and the points in which significant political figures in various regions stepped down due to corruption. And, utilizing the Difference in Difference method, we find that the anti-corruption campaigns are negatively influencing the fixed assets investment growth rates.

Author

• Chengyu Fu, Duke University