Working Paper: CEPR ID: DP12634
Authors: Maria Perrotta; Bei Qin; Giancarlo Spagnolo
Abstract: Fostering whistleblowing through leniency and asymmetric sanctions is regarded as a potentially powerfulanti-corruption strategy in the light of its success in busting cartels. The US Department of Justicestarted a pilot program of this kind in 2016. It has been argued, however, that introduced in China in1997, these policies did not help against corruption. We map the evolution of the Chinese anti-corruptionlegislation and aggregate enforcement data, documenting a large and stable fall in prosecuted cases afterthe 1997 reform. The fall is consistent with reduced corruption detection, but under specific assumptionsalso with improved deterrence. To resolve the ambiguity, we collect and analyze a random sample of casefiles from corruption trials. Results point indeed at a negative effect of the 1997 reform on corruptiondetection and deterrence, but plausibly linked to its poor design: contrary to what theory prescribes,it increased leniency also for bribe-taking bureaucrats that cooperate after being denounced, enhancingtheir ability to retaliate against whistleblowing bribe-givers.
Keywords: corruption; leniency; deterrence; China
JEL Codes: K14; N45; P37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 1997 reform (E69) | decrease in the number of prosecuted corruption cases (K42) |
| 1997 reform (E69) | decreased detection rates (C22) |
| leniency and asymmetric punishment (P37) | decrease in the number of prosecuted corruption cases (K42) |
| increased leniency for bribetakers (K42) | decreased incentives for reporting corruption (H57) |
| decreased incentives for reporting corruption (H57) | worsening detection rates (C22) |
| overall decrease in administered sanctions for bribetakers (D73) | worsening detection rates (C22) |
| lack of a spike in convictions (K14) | decreased detection rates (C22) |