Anti-corruption campaign and economic growth in Chinese cities: The dichotomous mechanism of network-based political competition

Abstract

I study how economic growth in Chinese cities responds to the recent anti-corruption campaign, focusing on a novel mechanism of network-based political competition, whereby the removal of investigated officials creates job vacancies and triggers promotion competition within the social network of the investigated officials for the vacancies. Such a network-based competition hinges on the premise that (1) some positions are persistently occupied by certain networks, and (2) high-ranked officials help low-ranked ones to achieve promotion within the network, two facts that are well supported by the evidence. Using a difference-in-differences and an instrumental variable approach, I find that cities’ GDP growth rate registers a 2.5-percentage-point increase following the investigation of the city leader’s connected officials. City leaders create a healthier business environment, attract investments, and increase government spending, while some long-term issues, including innovation, education, and environmental protection, are compromised, indicating the dichotomous nature of political competition.