Policy and misallocation: Evidence from Chinese firm-level data

Guowen Chen, Ana María Herrera and Steven Lugauer

European Economic Review, 2022, vol. 149, issue C

Abstract: Using a rich dataset of Chinese firms, we investigate the effect of industrial policies on resource misallocation. Our difference-in-difference model estimates provide evidence that government policies increased the dispersion of revenue productivity across firms in four-digit industries targeted for support relative to other industries, suggesting a negative impact on aggregate TFP. Estimates of a changes-in-changes model reveal that the policies had a heterogeneous impact across the productivity distribution of firms in supported industries. Furthermore, we show that the heightened misallocation is related to the way in which the Chinese government doled out support through subsidies for a subset of firms.

Keywords: Misallocation; Total factor productivity; China (search for similar items in EconPapers)
JEL-codes: D24 L25 O47 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292122001532
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:149:y:2022:i:c:s0014292122001532

DOI: 10.1016/j.euroecorev.2022.104260

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().