Favouritism to SOEs: institution quality or career concern?

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.

KEYWORDS:

• State-owned enterprise
• subsidy
• China
• institution quality

JEL CLASSIFICATION:

• O25
• E02
• D73

Acknowledgements

We gratefully acknowledge financial support from the National Social Science Foundation of China (20BJL023). This article is also supported by Digital Economy Platform, Major Innovation & Planning Interdisciplinary Platform for the “Double-First Class” Initiative, Renmin University of China.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Please see the article that industrial subsidies are at the heart of the trade war, at https://institutdelors.eu/en/publications/les-subventions-au-coeur-de-la-guerre-commerciale/

² Please see the work by Xu (2011) for an excellent summary.

Additional information

Funding

This work was supported by the National Social Science Foundation of China [20BJL023].