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Corruption and Resource Allocation Under China's Dual Track System

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  • Wei Li

    (Duke University)

Abstract

Detailed transaction and price data from 769 Chinese state-owned enterprises reveal that corruption --- official diversion of under-priced in-plan industrial goods to the market --- was pervasive in China between 1980 and 1989. More important, corruption has a significant impact on the allocation of both in-plan and outside-plan resources in ways that are consistent with implications of an extended version of Shleifer and Vishny's (1993) model of corruption. The empirical findings expose a serious downside of China's gradualist reform strategy --- corruption. In addition to distorting the allocation of resources, corruption had been blamed for undermining popular support for the reform in 1989.

Suggested Citation

  • Wei Li, 2000. "Corruption and Resource Allocation Under China's Dual Track System," Econometric Society World Congress 2000 Contributed Papers 0179, Econometric Society.
    • Handle: RePEc:ecm:wc2000:0179
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    References listed on IDEAS

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