Essays on corruption and development in china

Abstract

This dissertations offers a new conceptual framework to analyze the relationship between corruption and development. This theory, named "The Changing Wheels Hypothesis" accounts for China's recent economic miracle. A corollary of this theory is that fighting corruption might not lead to growth if it is not accompanied by an improvement of the overall institutional system. Thus, I analyze whether the Anti-Corruption Campaing launched in 2012 in China was effective in curving other personaly-type institutional mechanisms: elite connections. I find that in the State sector, the value of elite connections decreased after 2012, even though it remained significant. Finally, and without departing from the topic of corruption, I analyze whether more corrupt firms in China pay higher compensation schemes to their top management team. I find that more corrupt companies indeed pay higher salaries to their management team. However, there are substantial differences in the state and the private sector. Corruption in the private sector is oriented towards increasing firm value. Thus, only managers, but not directors, display higher salaries. This salaries seem to be expained by the better performance of these firms. By contrast, more corrupt state-owned companies pay significantly higher salaries to both directors and managers even though they do not bring additional value to the firm. In fact, more corrupt state firms display significanly lower firm performance. Corruption in the state sector is extractive.