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Government Assistance and Total Factor Productivity: Firm-level Evidence from China, 1998-2007

Richard Harris () and Shengyu Li ()
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Shengyu Li: Durham Business School

No 2016_04, CEGAP Working Papers from Durham University Business School

Abstract: The provision of large-scale assistance to industry is very important in China. The major contribution of this paper is to use Chinese firm-level panel data for 1998-2007 to introduce measures of assistance received by each firm directly into industry-level production functions determining firm output. Our results indicate inverted U-shaped gains from assistance: across the 26 industries considered, firms receiving assistance rates of 1-10%, 10-19%, 20-49% and 50+% experienced on average 4.5%, 9.4%, 9.2% and -3% gains in TFP, respectively. We also provide a simple agency model that justifies such a result

Keywords: Subsidies; TFP; China; firm-level (search for similar items in EconPapers)
JEL-codes: D24 O14 O43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-eff, nep-tid and nep-tra
Date: 2016-09
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