Corruption, anti-corruption, and inter-county income disparity in China

The rapid economic growth in China has been connected with a large income gap across regions. While most existing research has focused on economic factors to explain the problem, we argue that local government's anti-corruption endeavors also play a very significant role in influencing local income levels. Recent research shows that corruption undermines economic growth and generates poverty, we therefore hypothesize that government anti-corruption measures should increase local income levels. Using county-level data and Ordinary Least Square (OLS) estimates, we find counties with higher degree of anti-corruption tend to have higher income measured by county-level per capita GDP. We also employ a recently developed Shapley value decomposition technique to quantify the contributions of each variable. We find that anti-corruption plays a large role in explaining inter-county income disparity in China.

► We examine the effects of Chinese local government's anti-corruption measures.
► Anti-corruption is measured by input and output of audit.
► Counties with more anti-corruption endeavors show higher income levels.
► Anti-corruption affects inter-county income disparity more than many other variables.