Abstract

Publicizing the misconduct of individuals or companies may create a deterrent effect in society. This paper examines the deterrent effect of China's Social Credit System (SCS), which blacklists individuals or companies engaging in socially undesirable actions. The system publicizes the misconduct, identity information, and even photographs of the blacklisted parties, and denies them access to certain resources and services. This study uses staggered difference-in-difference estimates to analyze more than 40 million blacklist records from 2015 to 2024 in China. It shows a significant decrease in rule violations after the adoption of a pilot SCS in a city. Furthermore, by tracking the dynamics of millions of blacklisted companies and their executives, the study documents the mechanism of penalty, showing that blacklisted companies encounter difficulties in exiting the market. My findings are robust across different tests.