Corruption's effect on key economic performances

Methodology Starting off from a gap in the corruption literature, this study attempts to analyze the role of corruption in the paradox of China's economic reforms, i.e. the paradox of supposed local resistance versus the actual local pro-reform, developmentalist mindset.

Major studies of corruption's effect on key economic performances demonstrate that in fact, corruption does not speed up, but even slow down and complicate bureaucratic processes and market mechanisms further: Méon and Sekkat study the relationship between corruption and a series of indicators on growth, investment and governance in 71 countries, only to conclude that corruption actually "Sands the wheels" instead of greasing it.

Another meta-analysis on the relationship between corruption and growth also finds "Rather limited support to the view that corruption greases the wheels of growth".

As a consequence, a corruption literature that neglects corruption's role in these dynamic changes is sure to be at a disadvantage when it comes to explaining many development patterns of the modern world.

Transparency International's Corruption Perception Index, which measures perception of corruption, gives it a very humble ranking at the 75th position.

How Corruption Helped Reforms: Channels of Corruption Motives As the two alternate hypotheses were rejected, what remains is the paper's proposed argument.

Corruption as Creating Vested Interests As a means to compensate local government officials, corruption may earn their acquiescence to the reforms.

Did corruption motives exist in reality? Some empirical evidence The channels suggested in this paper only present some possible ways in which corruption motives can influence local officials' attitude to reforms.

Given scarcely any documentation of provincial Communist cadres' thought process behind their corruption behaviors, and that exposed anti-corruption incidents are often deeply politicized, it is impossible to determine whether corrupt cadres engaged in corruption truly as a means of "Exit" or not.

To begin with, evidence consistent with the compensation channel of corruption includes observation of a rise in corruption at local levels during reform, and a shift in the types of corruption.

From occupying a measly 1% of all corruption cases in 1979, these two quickly rose to 70.7% in 1986, 83.9% in 1989, and altogether accounted for more than half of all corruption cases since the reform through the 1990s.

Again, these are only indirect supports to the incentive-regulation channel of corruption motives; nonetheless, they demonstrate that the actual patterns of corruption and local politics were indeed consistent with the expectations of the corruption motives hypothesis.