Presentation by Giancarlo Spagnolo "Leniency, Asymmetric Punishment and Corruption: Preliminary Evidence from China" at the SITE Corruption Conference, 31 August 2015. Find more at: https://www.hhs.se/site

1. Leniency, Asymmetric Punishment and
Corruption
Preliminary Evidence from China
Maria Perrotta Berlin1 Bei Qin2 Giancarlo Spagnolo3
SITE CONFERENCE 2015
Stockholm, Aug. 31 - Sept. 1
1
SITE
2
University of Hong Kong
3
SITE, University of Rome ”Tor Vergata”, Eief, CEPR

2. Three Years of Corruption Crackdown
Big discussion:
Biased against Xi Jinpings
potential rivals?
Is it the reason behind current
economic slowdown? Extra
Less discussed:
Entering the 2nd stage, legal
reinforcement
Amendment IX proposed in
October 2014 includes heavier
penalties, but leniency and
asymmetric punishment become
more limited and discretional

3. Leniency
Definition: Immunity (or reduced sanctions) conditional on
self-reporting
Potentially very powerful: may deter collusion and corruption
at very low cost (Spagnolo 2004; Bigoni et al, RAND 2012, JLEO
2015...)
Main instrument to fight collusion in antitrust since 1993
(huge literature, see Miller AER 2009; Marvao and Spagnolo, 2015)
May be counterproductive if poorly designed or implemented
(Buccirossi and Spagnolo, JPubEc 2006)
May solve several of the problems raised by asymmetric
punishment (Dufwenberg and Spagnolo, EI 2015)

4. Asymmetric punishment
“Why, for a Class of Bribes,
the Act of Giving a Bribe
Should Be Treated as Legal”
— Kaushik Basu, 2011
Lots of misunderstanding
of the proposal (innocent
and not)
Some fair criticism on its
viability (e.g. by Dreze, see
discussion in Dufwenberg and
Spagnolo, EI 2015)
Mixed experimental
evidence (e.g. Abbink et al,
JPubEc 2014)
Xingxing Li: in China
since 1997, it did not
work.
...Didn’t it?

5. What we do
Claim difficult to test as changes in total corruption (what
matters) unobservable. To infer changes in total (unobserved)
corruption from changes in discovered cases we adapt methodology
of Miller, AER 2009:
TEST: If policy improves deterrence, we should see a stable
fall in the number of discovered cases after policy is
introduced
DATA: Number of prosecutions from the Procuratorates’
Yearly Reports, in printed version, for each of the Chinese
provinces since 1986 and from the Chinese National Bureau of
Statistics for 1998-2010

6. Test for structural break
q
q
q q
q
q
q
q
q
q
q
q q
q q
q
q
q q q
q
q
q
b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367b = −16.367
t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8t = −3.8
10
20
30
40
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year
Population−adjustednumberofcases
Actualandestimated−OLS
Consistent with significant deterrence effect of legal change
(leniency and asymmetric punishment strengthened) in 1997 (red
vertical line)

7. Robustness - different polynomials
q
q
q q
q
q
q
q
q
q
q
q q
q q q
q q q q q
q
q
q
q
q q
q
q
q q
q
q
q q q
q q q
q q q q q
q
q
q
q
q q
q
q
q
q
q
q
q q q
q q q
q q q q q
q
q
q
q
q q
q
q
q q
q
q
q q q
q q q
q q q q q
q
q

8. Robustness - Subset of provinces
q
q
q
q
q
q
q
q
q
q
q
q q
q q
q
q q
q q
q q
q
q
b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1b = −19.1
t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03t = −5.03
10
20
30
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year
Population−adjustednumberofcases
Actualandestimated−OLS

9. Caveats: much left to do
VERY PRELIMINARY
We don’t know which cases are extortionary (harassment)
bribes and which to gain illegitimate benefit
We don’t know in which cases leniency was applied and in
which asymmetric sanctions were
For asymmetric punishments, potential denomination effect if
briber-givers’ and bribe-takers’ cases recorded separately
(However, in Guo, 2008, 4-9% of bribery cases about
bribe-givers only)
Plan of case files analysis: Collect all the missing information for a
sample before and after change

10. Thank you

11. Extra - Economic growth in China
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