Anti-corruption shocks, intra-factional competition, and economic growth in China

This paper evaluates the consequences of the recent anti-corruption campaign for economic growth in China by answering how anti-corruption shocks are transmitted in city leaders’ social networks and affect their performance. The removal of corrupt officials creates job vacancies and increases the likelihood of promotion for their peers in the same social network; it also intensifies the intra-factional competition, which is a result of factional persistence. The GDP growth rate in a city registers a 2.5 percentage point increase following the investigation of the city leader’s connected politicians, while long-term issues, such as education and the environment, are compromised. The impact of anti-corruption shocks decays as the source is more distant in the network.JEL Classification: D72, D73, M51, P16, O12, O43, O47