Mild Government Failure

Shang-Jin Wei, Jianhuan Xu, Ge Yin and Xiaobo Zhang

No 31178, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A relatively mild form of government failure - for example, bureaucrats can count but do not differentiate quality - can significantly affect the efficacy of industrial policy. We investigate this idea in the context of China's largest pro-innovation industrial policy using a structural model. We find that the return to the subsidy program is -19.7\% (but would be 7.8\% if the mild government failure can be removed). Furthermore, the welfare loss is exacerbated by patent trade.

JEL-codes: H21 O14 O25 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-cna and nep-des
Note: PE PR
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Citations: View citations in EconPapers (4)

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