Does Poverty Relief Breed Corruption? An Evaluation of China's Poverty Alleviation Program

Does poverty relief breed corruption? This question has been examined in several electoral polities, but not in other political settings. This study engages in this academic discussion by proposing a unique corruption mechanism in the case of China. The dual causes of National Poor Counties' unique exit mechanism and long distance from economic hubs create a unique local poli-economic environment, in which local bureaucrats share the incentive to stay in the program, which in turn leads to an intra-elite alliance and more corruption. I test the empirical implication of these mechanisms by first building up a new county-level corruption dataset for 881 low-income counties,and then leveraging propensity score weighting to evaluate the impact of the third wave (2001-2010) of China's poverty alleviation program on county level corruption. The results of this test show some evidence that counties participated in the third wave of the program are associated with approximately 4.4-19.7 percent increase in corruption incidence and 10.5-23.5 percent increase in numbers of convicted persons compared to similar non-participant counties. These findings highlight the importance of proper institutional designs in poverty alleviation regimes to lower the corruption incentive of local bureaucrats.