 Resource misallocation in China: Biased subsidies versus credit discriminationLiying Weng, Changsheng Xu and Ming Yi Economic Modelling, 2024, vol. 134, issue C Abstract: This paper develops a two-sector growth model incorporating the state-owned and private-owned sectors and introduces biased subsidies and credit discrimination to explore how the effects of these two important policy distortions differ and interact. Based on the calibration of the Chinese economy, our primary findings are as follows. (1) Subsidy policies favoring state-owned enterprises improve the efficiency of resource allocation within each sector, whereas credit policies discriminating against private-owned enterprises reduce the efficiency of resource allocation within each sector. (2) Although both biased subsidies and credit discrimination lead to resource misallocation between sectors and ultimately harm total factor productivity (TFP), biased subsidies have a greater impact on intersectoral resource misallocation, limiting the TFP gains from mitigating credit discrimination. The policy implication is that mitigating distortions caused by biased subsidies should be prioritized over mitigating distortions caused by credit discrimination. Keywords: Policy distortions; Biased subsidies; Credit discrimination; Resource allocation efficiency; Total factor productivity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:134:y:2024:i:c:s0264999324000555 DOI: 10.1016/j.econmod.2024.106699 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.