Favouritism to SOEs: institution quality or career concern?

by Pu Chen, Chunyang Wang*

ARTICLE | Applied Economics Letters | Vol.29, 2022

Abstract

SOE is often viewed as favoured by the government compared to other firms. This is in conflict with GDP tournament theory on China's economic success. Using the Annual Census of Enterprises dataset from 1999 to 2008, this article reveals the surprising finding that SOEs did not obtain significantly more government subsidy. We find that regions with high-quality institutions significantly reduced SOE subsidy grants rather than the city party secretary's career concern to promote GDP.

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