Corruption, technical efficiency and total factor productivity growth: empirical evidence from China

This paper examines the impact of corruption on technical efficiency using a translog SFA model and an objective corruption variable of China from 1999 to 2017. The results reveal an inverted U-shaped relationship between corruption and technical efficiency. The decomposition of the total factor productivity (TFP) growth indicates that China emphasized input factors and technical progress while neglecting the improvement of technical efficiency, which plays a crucial role in determining the trajectory and magnitude of TFP growth. It suggests that the impact of corruption on technical efficiency is contingent on the interaction between corruption and other institutional variables, and anti-corruption efforts ultimately lead to the enhancement of technical efficiency and TFP growth. Our research not only explores the contrasting “grease the wheels” hypothesis and “sand the wheels” hypothesis regarding corruption and efficiency, but also provides new insights into how corruption influences TFP and economic growth.