Disguised Corruption: Evidence from Consumer Credit in China

68 Pages Posted: 13 Apr 2018 Last revised: 6 Dec 2018

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Wenlan Qian

National University of Singapore - NUS Business School

Amit Seru

Stanford University

Jian Zhang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Date Written: November 14, 2018

Abstract

Using a comprehensive sample of credit card data from a leading Chinese bank, we find that government bureaucrats receive 16% higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher likelihood of delinquency and debt forgiveness. These patterns are concentrated among bureaucrats with greater power and located in more “corrupt” cities. Areas associated with greater credit provision to bureaucrats open more branches and receive more deposits from the local government. Using staggered crackdowns of provincial-level political officials as exogenous shocks to the risk of corruption investigation, we find that the new credit cards originated to bureaucrats do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are no higher than those of non-bureaucrats in the treated provinces during the post-crackdown period. We use our estimates to infer the size of corruption and explore the impact on aggregate economic outcomes.

Keywords: Corruption, Credit Cards, Credit, Debt, Household Finance, Government, Bureaucrats, Banking, Political Connections, China

JEL Classification: D73, P26

Suggested Citation

Agarwal, Sumit and Qian, Wenlan and Seru, Amit and Zhang, Jian, Disguised Corruption: Evidence from Consumer Credit in China (November 14, 2018). Available at SSRN: https://ssrn.com/abstract=3152892 or http://dx.doi.org/10.2139/ssrn.3152892

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Wenlan Qian

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

HOME PAGE: http://sites.google.com/site/wenlanqian/

Amit Seru

Stanford University ( email )

Stanford, CA 94305
United States

Jian Zhang (Contact Author)

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

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