The effects of local government leadership turnover on entrepreneurial behavior

Zhiqiang Dong, Xiaobing Wang, Tianhua Zhang and Yuejun Zhong

China Economic Review, 2022, vol. 71, issue C

Abstract: The behavior of entrepreneurs is significantly affected by the rules of the game and the behaviors of government officials, because they can affect the relative payoffs to different entrepreneurial activities. Based on a representative survey data of private firms and the information of city government officials in China, this paper shows that the change of key local government officials affects the time allocation of the entrepreneurs, and subsequently the performance of firms. In order to maintain and develop the business-government relationship, entrepreneurs have to allocate less time on productive activities and more time on non-productive activities. This effect is particularly large if 1) entrepreneurs do not have political connections, 2) new officials lack local working experience, 3) private firms belong to special industries, 4) private firms have large number of employees. This paper provides micro-level evidence to Baumol's entrepreneurship allocation theory and a mechanism to account for the observed negative effect of local government leadership turnover on local economic growth in China.

Keywords: Government leaders turnover; Government-business relationship; Entrepreneurship; Time allocation (search for similar items in EconPapers)
JEL-codes: D72 L26 P26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:71:y:2022:i:c:s1043951x21001450

DOI: 10.1016/j.chieco.2021.101727

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