Do Natural Resources Breed Corruption? Evidence from China

Abstract

Rampant corruption is often observed in resource-rich countries, especially developing countries with weak political institutions. However, controversies exist regarding whether and how natural resources systematically breed corruption. With empirical evidence from China and through a subnational approach, I shed new light on the impacts of resources on corruption. By qualitative study of corruption cases, I identify the causal channels through which resources contribute to corruption, and using cross-regional and longitudinal statistical analysis on a unique dataset of corruption rates in China, I find that resource dependence significantly increases the propensity for corruption by state employees.

Commodities and corruption – How the middle class and democratic institutions lead to less corruption in resource-rich countries

“…Commodities can be either a blessing or a curse for resource-rich countries, with some suffering badly from corruption while others manage to prosper without any noteworthy bribery. 1 As far as natural resources are concerned, political scientists have identified mainly oil as a substantial cause of corruption, but they have also shown more generally that countries rich in many different kinds of natural resources experience considerably higher levels of corruption than countries without natural resources (Aslaksen, 2007;Gerring and Thacker, 2004;Montinola and Jackman, 2002;Ades and Di Tella, 1999;Leite and Weidmann, 1999;Zhan 2017). However, some empirical examples contradict this finding and demand further research: For instance, Norway (Eriksen and Soreide 2017) and the Netherlands have considerable oil and/or gas fields but are seemingly free from corruption.…”

Natural resources, rent dependence, and public goods provision in China: evidence from Shanxi’s county-level governments

“…Their studies are conducted from the viewpoint of political science and fiscal sociology. By comparing two neighboring counties in Guizhou Province and employing cross-prefectural and cross-provincial panel datasets, Zhan and Hong find that resource abundance breeds corruption, decreases government spending on human capital accumulation, and increases the likelihood of social instability (Hong 2013;Zhan 2013Zhan , 2015Zhan et al 2015). However, these studies still have some drawbacks in their methodology, as does the previous research by economists.…”

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“…Most of research above is at the crosscountry level, but there are also studies conducted at the country level, for example, in province of China. A research conducted by Zhan (2015) shows that natural resources have a significant positive effect on increasing corruption in China's Province.…”