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Government Assistance and Total Factor Productivity: Firm-level Evidence from China, 1998-2007

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Listed:
  • Richard Harris

    (Durham University, Durham University Business School)

  • Shengyu Li

    (Durham Business School)

Abstract

The provision of large-scale assistance to industry is very important in China. The major contribution of this paper is to use Chinese firm-level panel data for 1998-2007 to introduce measures of assistance received by each firm directly into industry-level production functions determining firm output. Our results indicate inverted U-shaped gains from assistance: across the 26 industries considered, firms receiving assistance rates of 1-10%, 10-19%, 20-49% and 50+% experienced on average 4.5%, 9.4%, 9.2% and -3% gains in TFP, respectively. We also provide a simple agency model that justifies such a result

Suggested Citation

  • Richard Harris & Shengyu Li, 2016. "Government Assistance and Total Factor Productivity: Firm-level Evidence from China, 1998-2007," CEGAP Working Papers 2016_04, Durham University Business School.
    • Handle: RePEc:dur:cegapw:2016_04
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    References listed on IDEAS

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    More about this item

    Keywords

    Subsidies; TFP; China; firm-level;
    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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