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Political economy of private firms in China

Author

Listed:
  • Guo, Di
  • Jiang, Kun
  • Kim, Byung-Yeon
  • Xu, Chenggang

Abstract

The sweeping change in political economy associated with the rapid growth of the private sector in China is rarely studied empirically in the economics literature. Using four cross-sectional surveys of private firms between 1995 and 2010, we examine the dynamics of rent creation from Party membership and other political connections when the regime changed from anti-capitalistic to pro-capitalistic during the period 2002–2004. We find that entrepreneurs with political connection enjoyed significantly more rents only after the constitutional amendments. This finding sheds lights on the nature of the political economy of today’s Chinese economy. Endogeneity/causality problems are addressed.

Suggested Citation

  • Guo, Di & Jiang, Kun & Kim, Byung-Yeon & Xu, Chenggang, 2014. "Political economy of private firms in China," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 286-303.
  • Handle: RePEc:eee:jcecon:v:42:y:2014:i:2:p:286-303
    DOI: 10.1016/j.jce.2014.03.006
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    References listed on IDEAS

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    Cited by:

    1. Zheng, Liang & Zhao, Zhong, 2017. "What drives spatial clusters of entrepreneurship in China? Evidence from economic census data," China Economic Review, Elsevier, vol. 46(C), pages 229-248.
    2. repec:eee:wdevel:v:106:y:2018:i:c:p:220-237 is not listed on IDEAS
    3. Guo, Di & Guo, Yan & Jiang, Kun, 2016. "Government-subsidized R&D and firm innovation: Evidence from China," Research Policy, Elsevier, vol. 45(6), pages 1129-1144.
    4. Eberhardt, Markus & Wang, Zheng & Yu, Zhihong, 2016. "From one to many central plans: Drug advertising inspections and intra-national protectionism in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 608-622.
    5. Xi Li & Xuewen Liu & Yong Wang, 2015. "A Model of China's State Capitalism," HKUST IEMS Working Paper Series 2015-12, HKUST Institute for Emerging Market Studies, revised Feb 2015.
    6. Jin Yang & Jian Huang & Yanhua Deng & Massimo Bordignon, 2018. "Plunging into the Sea: Ideological Change, Institutional Environments and Private Entrepreneurship in China," CESifo Working Paper Series 7077, CESifo Group Munich.
    7. repec:eee:deveco:v:130:y:2018:i:c:p:203-223 is not listed on IDEAS
    8. repec:bla:ecinqu:v:55:y:2017:i:2:p:825-842 is not listed on IDEAS
    9. Sokolov, Vladimir & Solanko, Laura, 2016. "Political influence, firm performance and survival," BOFIT Discussion Papers 20/2016, Bank of Finland, Institute for Economies in Transition.
    10. repec:taf:oaefxx:v:4:y:2016:i:1:p:1168728 is not listed on IDEAS

    More about this item

    Keywords

    Party membership; China; Political connections; Private firms;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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