Subsidies for Sale: Post-government Career Concerns, Revolving-Door Channels, and Public Resource Misallocation in China

72 Pages Posted: 7 May 2021

See all articles by Zeren Li

Zeren Li

Duke University, Department of Political Science

Date Written: May 3, 2021

Abstract

While the existing literature focuses on how revolving-door officials deliver favorable government treatment to firms after leaving public office, this paper theorizes that the post-government career concerns of public officials distort public resource allocation while still in office. To test this theory, I construct a new dataset that links over 98,000 corporate subsidy programs approved by multiple levels of governments with revolving-door officials who joined publicly listed Chinese firms between 2007 and 2019. I show that forward-looking officials provide sizable favorable subsidies to their future employers. To verify the exchange of favors, I document that firms repay public officials who have provided favorable subsidies by hiring and paying them enormous amounts of cash compensation. Finally, I find that the reputation cost is the mechanism through which this quid pro quo relationship is sustained.

Keywords: Business-Government Relations, Revolving-Door Officials, Corruption, China

Suggested Citation

Li, Zeren, Subsidies for Sale: Post-government Career Concerns, Revolving-Door Channels, and Public Resource Misallocation in China (May 3, 2021). Available at SSRN: https://ssrn.com/abstract=3839170 or http://dx.doi.org/10.2139/ssrn.3839170

Zeren Li (Contact Author)

Duke University, Department of Political Science ( email )

Durham, NC 27708
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
19
Abstract Views
121
PlumX Metrics