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Victor Shih – Protective Umbrella: How Factional Ties Attenuated the Impact of an Anti-Corruption Campaign in China
April 24, 2018 @ 4:00 pm - 6:00 pm
Speaker: Victor Shih, University of California San Diego
Do stricter enforcement of the law and sudden intensification of corruption investigation always lead to better economic outcomes in the medium term? A strand of the literature suggests that where the government imposes great distortion to the market, corruption “with theft” can incentivize local state agents to reduce the level of distortion, leading to greater degree of economic activities. Thus, a wide- ranging anti-corruption drive may stifle some economic activities, such as investment. We investigate this possibility by examining the impact of the 2012 anti-corruption drive in China on provincial level real estate investment, an area rife with corruption with theft. After controlling for provincial, month, and year fixed effects and for expectation of Xi’s ascendancy prior to the beginning of the anti-corruption drive, we find that anti-corruption slowed the growth of real estate investment in Chinese provinces without ties to Xi Jinping, the leader of China. For provinces whose leadership had past ties with Xi, however, they continued to experience rising property investment. This paper further adds to the literature on factionalism by showing that high level patronage boosted the level of investment in the midst of an anti-corruption campaign.
Victor Shih is an associate professor of political economy and has published widely on the politics of Chinese banking policies, fiscal policies and exchange rates. He was the first analyst to identify the risk of massive local government debt, and is the author of “Factions and Finance in China: Elite Conflict and Inflation.”
Prior to joining UC San Diego, Shih was a professor of political science at Northwestern University and former principal for The Carlyle Group.
Shih is currently engaged in a study of how the coalition-formation strategies of founding leaders had a profound impact on the evolution of the Chinese Communist Party. He is also constructing a large database on biographical information of elites in China.