Size, Determinants, and Consequences of Corruption in China's Provinces: The MIMIC Approach

52 Pages Posted: 1 Oct 2018

See all articles by Hailin Chen

Hailin Chen

Zhongnan University of Economics and Law

Friedrich Schneider

Johannes Kepler University Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Qunli Sun

Zhongnan University of Economics and Law

Date Written: August 08, 2018

Abstract

This paper uses a multiple indicators and multiple causes (MIMIC) model and estimates the extent of corruption in 30 Chinese provinces from 1995 to 2015. Treating corruption as an unobserved latent variable, the MIMIC results show that both government size and public investment have significant positive effects on corruption, while fiscal decentralization, citizen education level, average public sector wages, intensity of law enforcement, media supervision, political control and FDI all have significant negative effects on corruption. Among them, education level, size of public investment, intensity of law enforcement and political control are the most important determinants of China’s corruption. Additionally, we find that corruption decreases GDP and residents’ income significantly. In the 30 provinces the corruption index shows a negative trend from 1995 to 2015. Comparing the extent of corruption in the eastern, central and western provinces, we also find that the more developed the region, the lower the extent of corruption.

Keywords: corruption index, determinants and consequences, MIMIC model, China’s provinces

JEL Classification: D720, D730, H110, H770, K420

Suggested Citation

Chen, Hailin and Schneider, Friedrich G. and Sun, Qunli, Size, Determinants, and Consequences of Corruption in China's Provinces: The MIMIC Approach (August 08, 2018). CESifo Working Paper Series No. 7175, Available at SSRN: https://ssrn.com/abstract=3254203

Hailin Chen

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Friedrich G. Schneider (Contact Author)

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria
+43 732 2468 8210 (Phone)
+43 732 2468 8208 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Qunli Sun

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

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