The Gradients of Power: Evidence from the Chinese Housing Market

56 Pages Posted: 24 Jul 2014

See all articles by Hanming Fang

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Quanlin Gu

Peking University

Li-An Zhou

Peking University - Guanghua School of Management

Date Written: July 2014

Abstract

Using a large, unique dataset on the Chinese housing market, we propose to measure corruption using the price differences paid by bureaucrat buyers and non-bureaucrat buyers in the housing market. We find that the housing price paid by bureaucrat buyers is on average 1.05 percentage points lower than non-bureaucrat buyers, after controlling for a full set of characteristics of buyers, houses and mortgage loans. More interestingly, we find that the bureaucrat price discounts exhibit interesting gradients with respect to their hierarchical ranks, the criticality of their government agencies to real estate developers, and geography. We argue that the bureaucrat price discounts and the gradients of these discounts are unlikely to be driven by alternative explanations, thus they are evidence of corruption and measures of the market value of government power.

Suggested Citation

Fang, Hanming and Gu, Quanlin and Zhou, Li-An, The Gradients of Power: Evidence from the Chinese Housing Market (July 2014). NBER Working Paper No. w20317. Available at SSRN: https://ssrn.com/abstract=2471210

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Quanlin Gu

Peking University ( email )

Li-An Zhou

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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