Corruption stereotype and the unintended consequences of an anti-corruption campaign: evidence from the real estate sector in China

• In an anti-corruption campaign, government officials have strong incentives to avoid actions that may trigger disciplinary investigations. • Following China anti-corruption campaign, the fraction of residential land parcels purchased by SOE developers significantly increased. • In China, selling land to private developers carries a higher corruption stereotype. • Local officials, particularly the relatively “clean” ones, become more reluctant to sell land to private developers for self-preservation. • China’s anti-corruption campaign may have unintentionally contributed to the resurgence of the SOEs. In an anti-corruption campaign, government officials have strong incentives to avoid taking actions that may trigger disciplinary investigations. In China’s land sales market, we find that the fraction of residential land parcels purchased by State-Owned-Enterprises (SOE) developers significantly increased after the anti-corruption campaign compared to those purchased by private developers. This result is partly driven by the following mechanism: Because selling land to private developers carries a higher corruption stereotype, local officials, particularly the relatively “clean” ones, become more reluctant to sell land to private developers for the purpose of self-preservation. Thus China’s anti-corruption campaign may have unintentionally contributed to the resurgence of the SOEs. Local officials’ corruption stereotype avoidance in an anti-corruption campaign has broad implications.