Who gets caught for corruption when corruption is pervasive? Evidence from China’s anti-bribery blacklist

ABSTRACT

This article empirically investigates why in a corruption-pervasive country only a minority of the firms get caught for bribery while the majority get away with it. By matching manufacturing firms to a blacklist of bribers in the healthcare sector of a province in China, we show that the government-led blacklisting is selective: while economically more visible firms are slightly more likely to be blacklisted, state-controlled firms are the most protected compared to their private and foreign competitors. Our finding points to the fact that a government can use regulations to impose its preferences when the rule of law is weak and the rule of government is strong.

KEYWORDS:

• Corruption
• bribery
• healthcare
• China

JEL CLASSIFICATIONS:

• D73
• D78
• P26

Acknowledgement

We thank the editor and the referee for helpful comments. All remaining errors are our own.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Some of the media investigations of the causes of bribery in the healthcare sector are summarized as follows. China Daily (2011) reports that ‘the average salary of doctors is only 1.19 times greater than what is made on average by people in the rest of society’. Financial Times (2013) reveals that ‘[m]ost doctors only make 5,000 to 6,000 yuan (US$812 or US$974) a month in salary, but they are making hundreds of thousands of dollars a year in kickbacks’. Daily Mail (2014) points out that ‘[l]ow salaries and skimpy budgets drive doctors, nurses and administrators to make ends meet by accepting money from patients, drug suppliers and others’. Yang and Fan (2012), a doctor from a public hospital and the chief editor of Chinese Edition of Lancet, respectively, write in a column that ‘many physicians and surgeons consider kickbacks and bribes from drug companies as compensation for their high training costs and high professional risks’ and that the severe lack of ‘the implementation of existing [prescription] guidelines’ makes it easier for doctors to improperly ‘prescribe for financial gain’.

² The sources include People’s Procuratorates, public health departments of governments and Commissions for Discipline Inspection of the Communist Party.

³ We also tried using probit and logit models and the results remained similar.