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Leniency, Asymmetric Punishment and Corruption: Evidence from China

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  • Spagnolo, Giancarlo
  • Berlin, Maria
  • Qin, Bei

Abstract

Fostering whistleblowing through leniency and asymmetric sanctions is regarded as a potentially powerful anti-corruption strategy in the light of its success in busting cartels. The US Department of Justice started a pilot program of this kind in 2016. It has been argued, however, that introduced in China in 1997, these policies did not help against corruption. We map the evolution of the Chinese anti-corruption legislation and aggregate enforcement data, documenting a large and stable fall in prosecuted cases after the 1997 reform. The fall is consistent with reduced corruption detection, but under specific assumptions also with improved deterrence. To resolve the ambiguity, we collect and analyze a random sample of case files from corruption trials. Results point indeed at a negative effect of the 1997 reform on corruption detection and deterrence, but plausibly linked to its poor design: contrary to what theory prescribes, it increased leniency also for bribe-taking bureaucrats that cooperate after being denounced, enhancing their ability to retaliate against whistleblowing bribe-givers.

Suggested Citation

  • Spagnolo, Giancarlo & Berlin, Maria & Qin, Bei, 2018. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," CEPR Discussion Papers 12634, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12634
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    Cited by:

    1. Andres, Maximilian & Bruttel, Lisa & Friedrichsen, Jana, 2023. "How communication makes the difference between a cartel and tacit collusion: A machine learning approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 152, pages 1-1.
    2. Pavlova, Natalia & Shastitko, Andrey, 2016. "Leniency programs and socially beneficial cooperation: Effects of type I errors," Russian Journal of Economics, Elsevier, vol. 2(4), pages 375-401.
    3. Maximilian Andres & Lisa Bruttel & Jana Friedrichsen, 2020. "Choosing between explicit cartel formation and tacit collusion – An experiment," CEPA Discussion Papers 19, Center for Economic Policy Analysis.
    4. Kaushik Basu, 2018. "A short history of India's economy: A chapter in the Asian drama," WIDER Working Paper Series wp-2018-124, World Institute for Development Economic Research (UNU-WIDER).
    5. Andres, Maximilian & Bruttel, Lisa & Friedrichsen, Jana, 2021. "How do sanctions work? The choice between cartel formation and tacit collusion," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242372, Verein für Socialpolitik / German Economic Association.
    6. Lin Hu & Mandar Oak, 2023. "Can asymmetric punishment deter endogenous bribery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 3-21, January.
    7. Kaushik Basu, 2018. "A short history of India's economy : A chapter in the Asian drama," WIDER Working Paper Series 124, World Institute for Development Economic Research (UNU-WIDER).
    8. Theo Nyreröd & Giancarlo Spagnolo, 2021. "Myths and numbers on whistleblower rewards," Regulation & Governance, John Wiley & Sons, vol. 15(1), pages 82-97, January.
    9. Nyreröd, Theo & Spagnolo, Giancarlo, 2017. "Myths and Numbers on Whistleblower Rewards," SITE Working Paper Series 44, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 27 Apr 2018.
    10. Hu, Lin & Oak, Mandar, 2023. "Intermediated corruption under asymmetric punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 490-499.
    11. Jun Hu, 2021. "Asymmetric punishment, Leniency and Harassment Bribes in China: a selective survey," Working Papers hal-03119491, HAL.
    12. Dasgupta, Utteeyo & Radoniqi, Fatos, 2023. "Republic of beliefs: An experimental investigation✰," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 30-43.
    13. Peter T. Dijkstra & Jonathan Frisch, 2018. "Sanctions and Leniency to Individuals, and its Impact on Cartel Discoveries: Evidence from the Netherlands," De Economist, Springer, vol. 166(1), pages 111-134, March.

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    JEL classification:

    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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