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Political Connections, State Ownership and Productivity in China

Author

Listed:
  • Richard Harris
  • Nigar Hashimzade
  • Sai Ding

Abstract

Subordination of business to political influence has remains pervasive in China. We construct a Schumpeterian-type model of growth with managerial time allocation between productive activities and building up political connections. The model predicts the impact of different patterns of state ownership and/or political connectedness on firm productivity linked to a period of liberalization. We then investigate the relationship between political connections, state ownership, and total factor productivity (TFP) using firm-level data for China between 1998 and 2007. We find, consistent with the model, that the firms with the highest levels of TFP had low levels of political affiliation and/or state ownership.

Suggested Citation

  • Richard Harris & Nigar Hashimzade & Sai Ding, 2016. "Political Connections, State Ownership and Productivity in China," CESifo Working Paper Series 6236, CESifo.
    • Handle: RePEc:ces:ceswps:_6236
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    References listed on IDEAS

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    More about this item

    Keywords

    TFP; political connections; state ownership; China;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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