The evolution of corruption and development in transitional economies: Evidence from China |
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| Institution: | 1. Chu Hai College of Higher Education, Hong Kong;2. McMaster University, Canada;3. Nanjing University of Finance and Economics, China;4. International School of Business & Finance, Sun Yat-sen University, Zhuhai, China;1. School of Data Sciences, Zhejiang University of Finance and Economics, Hangzhou, Zhejiang, 310018, PR China;2. Department of Statistics, The University of British Columbia, Vancouver, BC, Canada;1. Accident Compensation Corporation, Wellington, New Zealand;2. School of Economics, Finance and Marketing, RMIT University, Building 80, Level 11, 445 Swanston Street, Melbourne, VIC 3000, Australia;1. School of Economics and Management, Beihang University, Beijing, 100191, China;2. College of Business, University of Nevada, Reno, Reno, NV 89557, USA;1. School of Economics and Finance, Xi’an Jiaotong University, Shaanxi, China;2. Business School, University of Jinan, China;3. Finance Research Institute, Shandong Collaborative Innovation Center for Capital Market Innovation and Development, University of Jinan, China;1. INCEIF, Kuala Lumpur, Malaysia;2. Taylor''s Business School, Taylor''s University, Malaysia;3. Nottingham University Business School, University of Nottingham Malaysia Campus, Semenyih, Malaysia;4. Suleman Dawood School of Business, Lahore University of Management Sciences (LUMS), Lahore, Pakistan;1. Faculty of Economics, Chulalongkorn University, Bangkok, Thailand;2. Department of Econometrics and Business Statistics, Monash University, Victoria, Australia |
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| Abstract: | It is widely accepted in the literature, that the level of corruption is negatively and robustly related to economic development. However, skeptics argue that for transitional economies, this relationship may not hold. Economic reform loosens up the control of local officials and can increase corruption; Corruption and per capita income can be positively related. Using panel provincial data of China from 1995 to 2014 on prosecuted cases of corruption, we discover that during the early phase of China’s economic reform (during Zhu Rongji and Hu-Wen administrations), a positive short-run relationship is indeed observed. But, there is a robust negative long-run cointegration relationship between corruption and per capita income. The development of the market economy improves private wage and income in the long-run. The relatively inefficient and low returns to ordinary corruption cannot compete with rising market returns, which lead to dwindling corruption. However, the share of major corruption cases is increasing over time to be able to compete with rising market wages. |
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| Keywords: | Corruption Development China H11 D73 K42 |
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