Abstract: This paper examines the effect of a 2009 statistics reform in China aiming at curbing economic data manipulation by local governments. The detection of manipulation relies on survey teams pre-deployed in 40% of the counties, enabling a difference-in-differences design. Using newly collected micro-level data from 2005 to 2018, I find a drop in GDP growth manipulation amounting to 5% of reported GDP growth in the treatment counties after the reform, as measured by the discrepancy between reported GDP growth and nighttime light intensity growth. Instrumenting the treatment counties using the random assignment of earlier survey teams in the 1980s generates similar results. Such a drop is mostly consistent with the reform generating a disciplining effect on local governments. In response to the reform, government policies shifted in directions conducive to economic growth, bank loans expanded, firm entry increased, and citizens' attitudes towards local governments improved. Corruption did not respond to the reform. These findings highlight the cost of politician misbehaviors distinct from corruption.

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