Political Effect of Economic Data Manipulation: Evidence from Chinese Protests

Abstract

As people become increasingly accessible to economic statistics, data manipulation occurs more often across regions, among countries with or without democratic institutions, and at different levels of governments. The governments release the better-looking falsified data in exchange for higher public evaluation on governmental performances, and thereby gain higher social support or stability. This paper explores the political effect, to be specific, the effect on state-society relationship of economic data manipulation using the case of Chinese protests from 1995 to 2013. The paper first provides some evidence for China's local GDP falsification. Then, by comparing the influence of reported GDP growth and that of actual economic growth on protests in China's provinces, I find that while actual growth has a consistent negative correlation with the number of protests, the reported data has little effect. The result holds under a series of robustness checks. It implies that citizens are able to interpret economic performances through their feeling for financial status, and that falsified economic data does not help alleviate their grievances during economic downturn.