Local Connectivity and Corruption: Evidence from China

Abstract

A sizable literature has shown that personal connections play an important role in corruption. Among such corruption activities, the most pervasive is corruption by native government workers through local networks. Yet, little is known about the effect of local connectivity on corruption. This paper studies how local connectivity affects corruption. The analysis is based on individual-level corruption practices from China (N=57,270). Corruption is measured by rents extracted from a population. The results show that government officials serving at hometown are less corrupt in extracting fewer rents from the local population than government officials from outside the region. Local connectivity of government officials reduced corruption by over one third on average. The effect was amplified by local network intensity but offset by ethnic diversity in a region. The findings reveal nuances for policy arrangements for control of corruption contingent on whether government officials are from the local population or from outside.

Keywords: Local connectivity, Rent seeking, corruption, China