Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2007, we show that industrial policies allocated to competitive sectors or that foster competition in a sector increase productivity growth. We measure competition using the Lerner Index and include as industrial policies subsidies tax holidays, loans, and tariffs. Measures to foster competition include policies that are more dispersed across firms in a sector or measures that encourage younger and more productive enterprises. (JEL L11, L25, L52, O14, O25, O47, P31)
Aghion, Philippe, Jing Cai, Mathias Dewatripont, Luosha Du, Ann Harrison, and Patrick Legros.
"Industrial Policy and Competition."
American Economic Journal: Macroeconomics,
Production, Pricing, and Market Structure; Size Distribution of Firms
Firm Performance: Size, Diversification, and Scope
Industrial Policy; Sectoral Planning Methods
Industrialization; Manufacturing and Service Industries; Choice of Technology
Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
Socialist Enterprises and Their Transitions