Wednesday, July 13, 2016

22nd July 2016: Disguised Corruption: Evidence from Consumer Credit in China

Sumit Agarwal
National University of Singapore

The paper uncovers a disguised form of corruption using a unique and comprehensive sample of credit card data in China. Bureaucrats—defined as those working in the government—receive 14 percent higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher delinquency rate and subsequently a higher likelihood of debt forgiveness by the bank. These patterns are concentrated among bureaucrats with greater power and in regions that can be classified ex ante as more corrupt. As a “quid pro quo”, bank branches associated with greater credit provision to bureaucrats receive more deposits from the local government. Consumers in regions with greater credit provision to bureaucrats receive significantly lower credit lines relative to similar consumers in other regions. Using staggered crackdowns of provincial-level political officials as exogenous shocks to the risk of corruption investigation, we find that the new credit cards originated to bureaucrats do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are no higher than those of non-bureaucrats in the treated provinces during the post-crackdown period. The paper uses estimates to infer the size of credit extended for corruption related reasons in China.

Date: July 22, 2016
Time: 04:00 P.M.

Lecture Theatre
Brookings India
No. 6, 2nd Floor,
Dr. Jose P Rizal Marg,
New Delhi-110021


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