Research on the Relationship between Integrity and Market Economy in China

The discussion on the question of integrity has a long history. It is regarded as an important research proposition in the fields of Chinese and Western philosophy, law, sociology, ethics, management and economics. Even though the research results are combined with each other for reference, there is still a lack of comprehensive analysis and empirical study on integrity. In the process of transition from planned economy to market economy, a series of problems have arisen. The problem of dishonesty has caused huge losses to the society as a whole. Therefore, it is of great theoretical and practical importance to conduct a quantitative analysis on the topic of trustworthiness, and investigate the relationship between trustworthiness and the economy.

This paper adopts a game theory model to analyze the reasons for corporate dishonesty, and the problem faced by the regulators. Based on the results from the model, we clarify the duties of various subjects (enterprises, governments and credit organizations) in the construction of a society with integrity.

Then, we analyze different cases of dishonesty and point out the channels through which the economy would be affected by the problem of dishonesty. (1) as an institution, integrity helps reduce the transaction cost and prompt market efficiency; (2) integrity serves as a production factor that influences the economy; (3) integrity will affect the economy by influencing the ability of small and medium enterprises to borrow.

Finally, after we establish the relationship between integrity and the market economy, we use survey data to conduct an empirical analysis on the development of integrity in China. The survey data allow us to build a cycle of integrity risk, and identify the current position in the cycle. Besides, we also compare the region difference regarding integrity, which supports the idea that integrity matters for the economic development.

Because the questionnaires are the only way to obtain the data that can be analyzed at present, the paper not only fills in the research gap caused by the lack of data, but also jumps out of the existing research methods, and enriches the empirical work for the study of integrity.