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China's anti-corruption campaign and firm productivity: Evidence from a quasi-natural experiment

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  • Kong, Dongmin
  • Tao, Yunqing
  • Wang, Yanan

Abstract

We investigate the causal effects of the anti-corruption campaign on firm-level total factor productivity (TFP) in China. We employ a difference-in-differences estimation to show the following results. (1) The anti-corruption campaign substantially improves TFP by 1.7%. (2) Our findings are particularly pronounced in non-state-owned enterprises, in firms without political connections, and in regions with weak legal environment. (3) We find that the anti-corruption campaign increases the sensitivity of firm investment to investment opportunities and generates more patents, which reveals the importance of investment efficiency channel and innovation channel. This study provides clear policy implication to regulators by identifying firm-level evidence for rent-seeking theory.

Suggested Citation

  • Kong, Dongmin & Tao, Yunqing & Wang, Yanan, 2020. "China's anti-corruption campaign and firm productivity: Evidence from a quasi-natural experiment," China Economic Review, Elsevier, vol. 63(C).
  • Handle: RePEc:eee:chieco:v:63:y:2020:i:c:s1043951x20301322
    DOI: 10.1016/j.chieco.2020.101535
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