Effects of Decentralization on Corruption in China

Effects of Decentralization on Corruption in China

Does decentralization exacerbate Chinese corruption? This study uses a unique quasiexperiment of the “province-managing-county” and “county-power-expansion” reforms in China from 2003 to 2015 to address this question. By improving the measures of corruption, decentralization, and institutional conditions, this study finds that decentralization can reduce corruption in China. The results remain robust after the potential endogeneity is controlled. Moreover, the establishment of appropriate institutions, such as legal and market systems, is effective in controlling corruption, whereas the current supervision system does not contribute to the reduction of corruption.