Is a Corruption Crackdown Really Good for the Economy? Firm-Level Evidence from China by Zhiyuan Chen Renmin Business School Renmin University of China Beijing, China 100872
[email protected] Xin Jin* Department of Economics University of South Florida Tampa, FL 33620
[email protected] and Xu Xu Department of Communication Department of Political Science Stanford University Stanford, CA 94305
[email protected] May 2020 *Corresponding author: Xin Jin. Department of Economics, University of South Florida, Tampa FL.
[email protected]. We thank Padmaja Ayyagari, Andrei Barbos, Ruoran Gao, Daniel Grodzicki, Giulia La Mattina, Maria Petrova, Yang Song, Michael Waldman, Shuang Zhang, Boliang Zhu, and Nicolas Ziebarth, Raymond Fisman, the Editor, three anonymous referees, and seminar participants at the University of South Florida, Renmin University (China), the Workshop in Applied and Theoretical Economics at the Central Florida University, the Eastern Economics Association meeting, and the Midwest International Economic Development Conference for helpful comments. Binrui Yang, Kuan Yu Huang, Tong Li, Yi Li, Yong Liao, Fan Ni, Qingzhen Ye, and Jiaojiao Zhao provided excellent research assistance. Declarations of interest: none. ABSTRACT We study the impact of anticorruption efforts on firm performance, exploiting an unanticipated corruption crackdown in China’s Heilongjiang province in 2004. We compare firms in the affected regions with those in other inland regions before and after the crackdown. Our main finding is an overall negative impact of the crackdown on firm productivity and entry rates. Further, these negative impacts are mainly experienced by private and foreign firms, while state-owned firms are mostly unaffected. We also present evidence concerning two potential explanations for our findings.