Abstract
The relationship between government subsidies and the total factor productivity of enterprises has been a controversial issue. Recent literature has stressed that the lack of efficient institutional settings increases the tendency to rent-seeking and reduces the productivity performance of enterprises. Moreover, the productivity performances of enterprises vary with their life cycles. In this light, since increasing attention has been directed at the role of government subsidies recently, we have measured the impacts of government subsidies on the total factor productivity of enterprises by exploring the role of the rent-seeking activities and life cycle. Then, a 16-year panel dataset (1998–2013) was organized using enterprise data, which included enterprises whose annual main business income is not less than 5 million yuan from the Chinese equipment manufacturing industry. We found that government subsidies negatively affect the total factor productivity of enterprises and specifically those enterprises in the growth stage. Next, the intermediary analysis confirmed that government subsidies induce unproductive rent-seeking activities, rather than productive rent-seeking activities. Finally, the implications of government subsidy policies for supporting the total factor productivity of enterprises are discussed.
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Data availability
The data that support the findings of this study are available on request from the corresponding author, please contact x_iaoge@hrbeu.edu.cn.
Notes
Despite our decision to lag by 1 period the independent variables, potentially the impact of subsidies on TFP might take more than 1 year to unfold.
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The authors are grateful to Xin Su and Jinqiu Li for their constructive suggestions.
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This research is supported by grants from the National Natural Science Foundation of China (Grant No. 71874040) and the Heilongjiang Provincial Natural Science Fund (Grant No. LH2021G007). All the authors certify that they have no affiliations with or involvement in any organization or entity with any financial interest or nonfinancial interest in the subject matter or materials discussed in this manuscript.
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All the authors contributed to the study conception and design. All the authors commented on previous versions of the manuscript. All the authors read and approved the final manuscript. Dr. Liu assisted in updating our data and gave us important guidance on revisions to the intermediary test section.
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Appendix A
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Ma, Y., Ni, H., Yang, X. et al. Government subsidies and total factor productivity of enterprises: a life cycle perspective. Econ Polit 40, 153–188 (2023). https://doi.org/10.1007/s40888-022-00292-6
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DOI: https://doi.org/10.1007/s40888-022-00292-6