How Are Anti-corruption Shocks Transmitted in Social Networks: the Role of Intra-factional Competition

In this paper, I study how anti-corruption shocks affect Chinese city leaders through political factions or social networks. I find that college and workplace connections are associated with a 2.5 percentage points increase in the per capita GDP growth rate, about 28% of the sample mean, in specifications including fixed effects to control for differences across colleges and workplaces. Instrumental variable regressions show similar results. All further evidence supports the explanation that the corruption investigation of officials initiates promotion competition inside the political faction or the social network, which is defined by shared backgrounds. In addition, I find that city officials promote economic growth by investment and government expenditure, but at the expense of long-term goals such as education and the environment.