The effects of corruption on China’s provincial eco-efficiency

Abstract

This paper extends the literature on economic consequences of corruption. We simultaneously consider corruption’s impacts on output, production efficiency, and environmental performance in an eco-efficiency framework. Pollution is considered as undesirable output in the production process. We construct an eco-efficiency measure from a non-oriented data envelopment analysis model that incorporates a non-convex metafrontier, super-efficiency, and undesirable outputs into a directional distance function. By using panel data from 30 Chinese provinces from 1998 to 2016 in a spatial analysis, we find that corruption, measured by filed-cases of corruption-related crimes, has a significantly negative direct impact on eco-efficiency. The regional spillover effect is not significant for provinces in the same geographical region, but is marginally significant for provinces sharing a common border.

Keywords:

• Corruption
• eco-efficiency
• Chinese regions

JEL CLASSIFICATION:

• D61
• H11
• Q56

Acknowledgement

We are grateful for helpful comments and suggestions from three anonymous referees and Professor Chun-Ping Chang. All remaining errors are ours.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 See Yu, Huang, and Zhang (2018) for a graphical demonstration of the difference between a convex metafrontier and a non-convex metafrontier.

2 See Huang, Yu, and Ma (2018) for the details of constructing the capital stock series.

3 We thank an anonymous referee for pointing out that, conversely, using a bounded component such as the EPI may result in an imprecise DEA model (Chen et al. 2017; Zhu 2003). To check the severity of this issue, we experiment with directly including the four pollutants in the model instead of using the combined index. We find that the resulting eco-efficiency measure and the regression results do not change much. Our conclusions remain unchanged. These alternative results, not presented here to save space, are available from the authors upon request.

4 Data are collected from several official sources, including China Statistical Yearbook, China Environment Yearbook, China Energy Statistical Yearbook, China Yearbook for Regional Economy, China Industrial Economy Statistical Yearbook, Statistical Yearbook of the Chinese Investment in Fixed Assets, China Labor Statistical Yearbook, China Urban Construction Statistical Yearbook, and Procuratorial Yearbook of China.

5 Du, Lu, and Tao (2008), Cai, Fang, and Xu (2011), and Wang and You (2012) construct their measures of corruption in China by using survey data. However, these data are not publicly available.

6 A close investigation of this specification finds that it yields eco-efficiency measures that may be too volatile to be reliable.

Additional information

Funding

Yin acknowledges supports from the Major project of Social Science Achievement Appraisal Committee of Hunan Province (No. XSP22ZDA001), the Key project of Hunan Education Department (No. 21A0215), and Research Center for Financial Engineering and Financial Management of Hunan Province (No. 18FEFMY6). Yu acknowledges supports from National Natural Science Foundation of China (No. 71903068).

Notes on contributors

Zhujia Yin

Zhujia Yin, Professor of Economics, Changsha University of Science & Technology, China. Research interests: Corporate Finance, Capital Market, Efficiency and Productivity Analysis, Chinese Economy. Yin has published papers in Finance Research Letters, Emerging Markets Finance and Trade, The Singapore Economic Review, PLoS ONE, and Mathematical Problems in Engineering.

Leilei Li

Leilei Li, Graduate student, Changsha University of Science & Technology, China. Research interests: Applied Economics, Efficiency and Productivity Analysis, Spatial Economics.

C. James Hueng

C. James Hueng, Professor of Economics, Western Michigan University, USA. Research interests: Macro and Monetary Economics, Financial Economics, Applied Econometrics, Chinese Economy. Hueng has published papers in Journal of Money, Credit and Banking, Journal of Empirical Finance, Journal of Macroeconomics, Southern Economics Journal, China Economic Review, Quantitative Finance, Contemporary Economic Policy, Japan and the World Economy, Finance Research Letters, etc.

Yantuan Yu

Yantuan Yu, Associate Professor, Guangdong University of Foreign Studies, China. Research interests: Environmental Economics, Energy Economics, Spatial Economics, Efficiency and Productivity Analysis. Yu has published papers in Energy Economics, Energy Policy, Journal of Environmental Management, Ecological Modelling, Emerging Markets Finance and Trade, Technological Forecasting and Social Change, Environmental and Resource Economics, Journal of Industrial Ecology, etc.