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Development Seminar @ Brookings India | Disguised Corruption: Evidence from Consumer Credit in China

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Dr Sumit Agarwal speaks about his talk
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Dr Sumit Agarwal speaks about his talk

Abstract
The paper uncovers a disguised form of corruption using a unique and comprehensive sample of credit card data in China. Bureaucrats—defined as those working in the government—receive 14 percent higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher delinquency rate and subsequently a higher likelihood of debt forgiveness by the bank. These patterns are concentrated among bureaucrats with greater power and in regions that can be classified ex ante as more corrupt. As a “quid pro quo”, bank branches associated with greater credit provision to bureaucrats receive more deposits from the local government. Consumers in regions with greater credit provision to bureaucrats receive significantly lower credit lines relative to similar consumers in other regions. Using staggered crackdowns of provincial-level political officials as exogenous shocks to the risk of corruption investigation, we find that the new credit cards originated to bureaucrats do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are no higher than those of non-bureaucrats in the treated provinces during the post-crackdown period. The paper uses estimates to infer the size of credit extended for corruption related reasons in China.

Speaker: Sumit Agarwal is the Vice-Dean of Research and the Low Tuck Kwong Professor at the School of Business and a Professor in the departments of Economics, Finance and Real Estate at the National University of Singapore.

Discussant: Shamika Ravi, Senior Fellow, Brookings India

Development Seminar Series Photographs

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Distinguished Fellow Rakesh Mohan (former deputy governor of the RBI) and Shamika Ravi (Senior Fellow, Brookings India) at the 1st Development Seminar on “Transporting India to the 2030s” on July 1, 2016

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Distinguished Fellow Rakesh Mohan at the 1st Development Seminar @ Brookings India

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Rakesh Mohan (former Executive Director for India to the IMF) speaks to the audience during the Development Seminar “Transporting India to the 2030s by Dr. Rakesh Mohan” on July 1, 2016

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Dr. Subir Gokarn (Executive Director, IMF, and founding research director of Brookings India) at the Development Seminar on “Dr D. Subbarao on leading the RBI through 5 turbulent years” on August 5, 2016

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Dr. D. Subbarao (Former Governor of the Reserve Bank of India)

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Senior Fellow Shamika Ravi launches her report “Building Smart Cities in India” on August 19, 2016

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Amitabh Kant (CEO, NITI Aayog, Government of India) launching Brookings India research paper “Building Smart Cities in India: Allahabad, Ajmer and Visakhapatnam” on August 19, 2016

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Shri Amitabh Kant (CEO NITI Aayog, Government of India) during the Development Seminar on smart cities at Brookings India on August 19, 2016

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Dr. Rinku Murgai (Lead Economist, World Bank) presents a paper on “Pathways to Reducing Poverty and Sharing Prosperity in India” on November 2, 2016

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Panel including Shamika Ravi (Senior Fellow, Brookings India), during the Development Seminar “The Online Education Revolution and India” on February 17, 2017

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R. Subrahmanyam (Additional Secretary, Technical Education, Ministry of Human Resource Development) speaks of the government’s SWAYAM initiative, during the Development Seminar on February 17, 2017

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Dr. Alex T. Tabarrok (George Mason University, Virginia) gives his talk on Disruptions due to Online Education at a Brookings India Development Seminar

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The audience listening to the panel during the Development Seminar “Environmental Challenges in India” on January 20, 2017

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Shamika Ravi (Senior Fellow, Brookings India) and Prof. Somanathan (Indian Statistical Institute, Delhi) listen to Dr. Ajay Mathur (Director General, The Energy and Resources Institute) during the Development Seminar “Environmental Challenges in India” on January 20, 2017

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Dr. Ajay Mathur (Director General, The Energy and Resources Institute) speaks during the Development Seminar “Environmental Challenges in India” on January 20, 2017

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Prof. E. Somanathan (Indian Statistical Institute, Delhi) engages with the audience during the Development Seminar “Environmental Challenges in India” on January 20, 2017

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Prof. E. Somanathan (Indian Statistical Institute, Delhi) presents his work to the audience during the Development Seminar “Environmental Challenges in India” on January 20, 2017

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Professor Shivaram Rajgopal (Columbia Business School) and Shamika Ravi (Senior Fellow, Brookings India), listen to Somasekhar Sundaresan (Advocate) during the Development Seminar “Corporate social responsibility in India: Law, implementation and evidence” on Dec 12, 2016

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Sumit Agarwal (Vice-Dean of Research, National University of Singapore) during our Development Seminar on Disguised Corruption: Evidence from Consumer Credit in China on July 22, 2016

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Shamika Ravi (Senior Fellow, Brookings India) and Sumit Agarwal (Vice-Dean of Research, National University of Singapore) engage with the audience in the Development Seminar “Disguised Corruption: Evidence from Consumer Credit in China” on July 22, 2016

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Brookings India Senior Fellow Shamika Ravi with S.Y. Quraishi, former Chief Election Commissioner of India

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Brookings India Senior Fellow Shamika Ravi introducing Prof. Jonathan Morduch, Professor of Public Policy and Economics, NYU Wagner Graduate School of Public Service

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Prof. Jonathan Morduch, Professor of Public Policy and Economics, NYU Wagner Graduate School of Public Service, presenting his talk on “America’s Economic Anxiety”

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Executive Director Harsha Vardhana Singh, Ambassador Arun Kumar Singh and Senior Fellow Shamika Ravi listen to Prof. Jonathan Morduch’s presentation

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Dr. Neeraj Kaushal discusses immigration and its discontents

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Dr. Neeraj Kaushal presents her work on Immigration and its Discontents

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An audience member asks a question during the Q&A session of the “Immigration and its Discontents” Development Seminar

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Viral Acharya answers to questions from the audience at the Development Seminar, “The Real Effects of Unconventional Monetary Policy”

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Viral Acharya presents at the Development Seminar, “The Real Effects of Unconventional Monetary Policy”

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Viral Acharya interacts with the audience at the Development Seminar, “The Real Effects of Unconventional Monetary Policy”

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About Development Seminars Series @ Brookings India

The Development Seminars Series @ Brookings India is a platform for global scholars to present their work to a curated audience of senior government officials, politicians, journalists, academics and policy enthusiasts. The format of the seminars includes a senior researcher as a lead presenter and a government/industry expert to discuss the results and relevance within the Indian context. The fundamental focus of the seminar series is to draw research-based insights to shape and influence policy dialogues in India, through purposeful and pointed discussions.

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