Discipline without Slack: Anti-Corruption in China's Health Sector
Abstract
Anti-corruption reforms are expected to improve public services by reducing waste and private extraction, yet services do not always improve even when corruption is effectively constrained. This chapter argues that service outcomes depend on how corruption was organized before reform. When corrupt exchange becomes repeated and embedded in organizational roles, it can generate discretionary resources and trusted relationships that help public organizations operate despite weaknesses in their formal support systems. Such corruption remains costly and distorting, but removing it may also disrupt the informal capacity that sustained routine work.
I examine this argument in China's health sector, where the National Volume-Based Procurement program and the 2023 anti-corruption campaign constrained drug-related corruption. Province-level expenditure data from 2010 to 2023 show that outpatient care did not become more affordable and that expenditure rose more where hospitals had relied more heavily on the drug-centered system weakened by reform. Firm records and field interviews provide complementary evidence that the reforms disrupted both financial and relational support. The findings identify a central challenge for anti-corruption reform: after constraining private extraction, how can governments replace the informal resources and relationships on which public provision has come to depend?