APPLIED MICRO: Rent-Seeking and the Spatial Allocation of Economic Activity: Evidence from China’s Anti-Corruption Campaign; Professor Filipe Campante (Johns Hopkins University)

Abstract

We show direct evidence of the distortionary effects of rent-seeking activities, by studying the impact on Beijing’s restaurant sector of China’s 2012 anti-corruption campaign, which placed strict limits on lavish spending by public officials. Restaurants located closer to government offices experienced a relative decline in consumer demand. The post-campaign distribution of establishments was less spatially concentrated around government offices and had a smaller presence of high-end restaurants than before the campaign. Our results underscore the influence of rent-seeking activities on the prior configuration of the restaurant sector, suggesting that they distort economic outcomes beyond industries targeted by the rent-seeking itself.