Selective industrial policy and capital misallocation: evidence from the ‘Revitalization Plan for Ten Industries’ in China

Xiulu Huang, Pengfei Ge and Bole Zhou

Journal of the Asia Pacific Economy, 2024, vol. 29, issue 1, 206-236

Abstract: Capital misallocation is a main obstacle to China’s economic development. This paper deploys a quasi-natural experiment formed by the ‘Revitalization Plan for Ten Industries’ (RPTI) and examines the impacts that selective industrial policies have on capital misallocation. It is found that the RPTI significantly exacerbates capital misallocation and that the effect does not disappear when the RPTI ends. Mechanism analysis indicates that the RPTI significantly increases the capital productivity of firm groups with high capital productivity but significantly reduces the capital productivity of firm groups with low capital productivity. This can be further interpreted by a decrease or an increase of inefficient investment and financial constraints faced by the corresponding firm groups. The documented relationship is stronger in state-owned enterprises and in firms located in areas of high marketization. Our findings advance the understanding of governmental policy intervention in developing countries.

Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/13547860.2021.2010378 (text/html)
Access to full text is restricted to subscribers.

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:taf:rjapxx:v:29:y:2024:i:1:p:206-236

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjap20

DOI: 10.1080/13547860.2021.2010378

Access Statistics for this article

Journal of the Asia Pacific Economy is currently edited by Leong Liew

More articles in Journal of the Asia Pacific Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().