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China’s Anticorruption Campaign and Entrepreneurship

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  • Dongmin Kong
  • Ni Qin

Abstract

This paper investigates the causal effect of corruption on entrepreneurship. We use staggered anticorruption investigations in China as exogenous shocks to conduct difference-in-differences estimation and find that the country’s anticorruption campaign has a sizeable positive effect on entrepreneurship, especially in urban areas, areas with high levels of trust, and areas with short verdict processes after investigation. We discuss four plausible mechanisms for the positive effect of the anticorruption campaign: reduced rent seeking, improved government quality, technology spillover from innovation, and the easing of financial constraints for non-state-owned enterprises. Our results are robust to a battery of tests based on different specifications and alternative measures. Overall, this study provides a timely evaluation of the importance of anticorruption efforts in a typical emerging market.

Suggested Citation

  • Dongmin Kong & Ni Qin, 2021. "China’s Anticorruption Campaign and Entrepreneurship," Journal of Law and Economics, University of Chicago Press, vol. 64(1), pages 153-180.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/711313
    DOI: 10.1086/711313
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    Cited by:

    1. Ding, Xiaoya (Sara) & Guo, Mengmeng & Kuai, Yicheng & Niu, Geng, 2023. "Social trust and firm innovation: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 474-493.
    2. Wu, Jinshun & Wu, Luyao, 2023. "Impacts of digital inclusive finance on household entrepreneurship," Finance Research Letters, Elsevier, vol. 56(C).
    3. Xiong, Jiacai & Yang, Zelin & Wang, Xin & Chan, Kam C., 2023. "Does dialect diversity affect entrepreneurial activities? Evidence from China," Economic Modelling, Elsevier, vol. 128(C).
    4. Yang, Laifeng & Wang, Qing Sophie & Lai, Shaojie, 2023. "Fair and square: The impact of judicial independence on entrepreneurship," Finance Research Letters, Elsevier, vol. 55(PB).
    5. Qia, Zhang & Yanting, Jin, 2023. "Historical or contemporary causes of corruption: International evidence," Finance Research Letters, Elsevier, vol. 56(C).
    6. Liu, Mengsha & Jiang, Yan & Wei, Xiaokun & Ruan, Qingsong & Lv, Dayong, 2023. "Effect of high-speed rail on entrepreneurial activities: Evidence from China," Socio-Economic Planning Sciences, Elsevier, vol. 87(PA).
    7. Zhang, Liangliang & Tao, Yunqing & Nie, Cong, 2022. "Does broadband infrastructure boost firm productivity? Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 48(C).

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