Corruption and social interaction: Evidence from China

To theoretically and empirically explore whether social interaction, either local and global, influences the incidence of corruption, we first present an interaction‐based model which predicts that the level of corruption is positively associated with social interaction. We then empirically verify this theoretical prediction using within‐country evidence at the province‐level in China from 1998 to 2007. The panel data evidence clearly indicates that social interaction has a statistically significantly positive effect on the corruption rate in China. Our findings therefore underscore the relevance of social interaction in understanding corruption and point to important policy implications.