IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2010.73.html

The Consequences of Corruption: Evidence from China

Author

Listed:
  • Bin Dong

    (The School of Economics and Finance, Queensland University of Technology)

  • Benno Torgler

    (The School of Economics and Finance, Queensland University of Technology, CREMA – Center for Research in Economics, Management and the Arts and CESifo)

Abstract

With complementary Chinese data sets and alternative corruption measures, we explore the consequences of corruption. Adopting a novel approach we provide evidence that corruption can have both, positive and negative effects, on economic development. The overall impact of corruption might be the balance of the two simultaneous effects within a specific institutional environment (“grease the wheels” and “sand the wheels”). Corruption is observed to considerably increase income inequality in China. We also find that corruption strongly reduces tax revenue. Looking at things from an expenditure point of view we observe that corruption significantly decreases government spending on education, R&D and public health in China. We also observe that regional corruption significantly reduces inbound foreign direct investment in Chinese regions, which indicates that the pollution haven hypothesis may not hold in China. This finding sheds a new light on the “China puzzle” that China is the largest developing host of FDI while it is appears to be very corrupt. Finally we observe that corruption substantially aggravates pollution probably through loosening environment regulation, and that it modifies the effects of trade openness and FDI on the stringency of environmental policy in a manner opposite to that observed in literature to date.

Suggested Citation

  • Bin Dong & Benno Torgler, 2010. "The Consequences of Corruption: Evidence from China," Working Papers 2010.73, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2010.73
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2010-073.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Qiu & Maung, Min & Shi, Yulin & Wilson, Craig, 2014. "Foreign direct investment concessions and environmental levies in China," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 241-250.
    2. Qu, Guangjun & Sylwester, Kevin & Wang, Feng, 2016. "Anticorruption and Growth: Evidence from China," MPRA Paper 72190, University Library of Munich, Germany.
    3. Wang, Shuhong & Zhao, Danqing & Chen, Hanxue, 2020. "Government corruption, resource misallocation, and ecological efficiency," Energy Economics, Elsevier, vol. 85(C).
    4. Ren, Yi-Shuai & Ma, Chao-Qun & Apergis, Nicholas & Sharp, Basil, 2021. "Responses of carbon emissions to corruption across Chinese provinces," Energy Economics, Elsevier, vol. 98(C).
    5. Manu K.S. & Vivek Patel, 2018. "The Dynamic Linkage between Corruption Index and Foreign Direct Investment: The Case of Developed and Developing Countries," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 9(2), pages 59-67, May.
    6. Bo Sui & Gen-Fu Feng & Chun-Ping Chang, 2018. "The pioneer evidence of contagious corruption," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(2), pages 945-968, March.
    7. Mohammad Abdul Munim Joarder & Monir Uddin Ahmed, 2023. "Does natural resource abundance breed corruption? The role of political institutions," SN Business & Economics, Springer, vol. 3(9), pages 1-43, September.
    8. Liu, Baohua & Lin, Yan & Chan, Kam C. & Fung, Hung-Gay, 2018. "The dark side of rent-seeking: The impact of rent-seeking on earnings management," Journal of Business Research, Elsevier, vol. 91(C), pages 94-107.
    9. Buia, Raluca E. & Molinari, M. Cristina, 2012. "Corruption and positive selection in privatization," Research in Economics, Elsevier, vol. 66(4), pages 297-304.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2010.73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alberto Prina Cerai The email address of this maintainer does not seem to be valid anymore. Please ask Alberto Prina Cerai to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.