Secrets in Asset Purchases : Estimating the Unofficial Incomes of Officials

We estimate the size of the likely unofficial income of a household with a government official by the difference between the income that would be necessary to explain their observed home purchase behavior and the official income. Using unique and comprehensive administrative records on the House Provident Fund and home purchases between 2006 and 2013 in a large Chinese city, we reach three conclusions. First, an average official's unofficial income is 83% of her official income; this percentage increases sharply with the official's rank. Second, about 13% of the officials have an unofficial income, and the proportion also increases with rank. Third, government officials are not underpaid, and their unofficial incomes are not a compensation for low government salaries. Additionally, evidence suggests unofficial incomes have declined since the recent anti-corruption campaign. An analysis of a separate cross-city dataset corroborates the key conclusion