How does anti-corruption campaign affect the labour income share in China?

ABSTRACT

Based on the difference-in-difference (DID) methodology, this paper empirically investigates the impact of the current anti-corruption campaign on the share of labour income in China. Using a firm-level data on Chinese corporations listed on Shanghai and Shenzhen Stock Exchanges from 2009 to 2015, we find that the campaign contributes to the rise in the labour income share, while there is considerable heterogeneity. The magnitude of the effect depends on firm’s ownership and market power. This paper advances the existing studies examining the nexus between corruption and income distribution from a novel perspective.

KEYWORDS:

• Anti-corruption
• labour income share
• difference-in-difference
• income distribution

JEL CLASSIFICATION:

• D31
• D73
• O15
• P23

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ A briefing is available at: http://www.forbes.com/sites/richardlevick/2015/01/21/new-data-bribery-is-often-an-unspoken-rule-in-china/#4fbbdc6645fc.

² This is called ‘the index of government intervention in firms’ business’, one of the indices of marketization constructed by Fan, Wang, and Zhu (2010).

³ Previous researches on corruption in China confine their attention on economic growth as well as firm performance. Jiang and Nie (2014), Ramirez (2014) and Xu and Yano (2017) follow this line.

⁴ The total income includes total wage, depreciation of fixed assets, and net profits, all of which are available from annual reports issued by listed corporations.

⁵ The findings above remain robust to a number of alternative specifications. Due to brevity, we omit robustness analysis.

Additional information

Funding

This research was supported by the National Natural Science Foundation of China [71603115].