Subsidies for Sale: Post-government Career Concerns, Revolving-Door Channels, and Public Resource Misallocation in China
84 Pages Posted: 7 May 2021 Last revised: 13 Oct 2022
Date Written: September 12, 2022
While the existing literature has focused on how revolving-door officials deliver preferential treatment to firms after taking corporate positions, this paper shows that officials distort public resource allocation for private-sector job opportunities while still in office. To test this theory, I construct a new dataset that links over 160,000 corporate subsidy programs approved by three levels of local government with former officials who joined publicly listed Chinese firms between 2007 and 2019. I show that forward-looking officials provide favorable subsidies to their future employers. To verify the exchange of favors, I document that firms repay officials who have provided favorable subsidies by hiring and compensating them in cash. Evidence also suggests that the exchange of favors leads to the allocation distortion of public resources.
Keywords: Business-Government Relations, Revolving-Door Officials, Corruption, China
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