Top-Down Monitoring and Corruption : Evidence from a Village Relocation Project in China

This paper investigates corruption in welfare targeting in developing countries and evaluates the effectiveness of top-down monitoring in addressing this issue. Using administrative records from China's rural Basic Living Allowance program (RBLA), we demonstrate that cadre-connected families are more likely to receive RBLA and obtain disproportionately higher amounts, even when controlling for eligibility. This quantifies the extent of corruption in welfare allocation within the current modalities. We then assess the impact of increased top-down monitoring by examining the "Yellow River floodplain relocation program," which involves the wholesale relocation of villages to town centers. Our findings reveal an immediate and significant reduction in corruption following relocation. Complementary surveys eliminate alternative explanations related to informational advantage and labor supply impacts, providing evidence for the effectiveness of top-down monitoring in welfare allocation. This study contributes to understanding corruption control in welfare targeting and the potential benefits of top-down monitoring