Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240372 
Year of Publication: 
2020
Series/Report no.: 
BOFIT Discussion Papers No. 21/2020
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
This paper investigates how politicians' patronage connections affect privatizations in China. The connections to top political leaders (i.e., Central Committee of the Communist Party of China) make local politicians engage more in rent-seeking by selling state-owned enterprises (SOEs) at substantial discounts. These connected local politicians are also more protected in anti-corruption investigations, thus extracting more rents by selling SOE assets at substantial discounts. Consequently, the privatizations conducted by the local politicians with patronage connections achieve significantly lower gains in efficiency and performance. To identify the role of patronage connection in privatization, we use the mandatory retirement age cut-offs of Central Committee members in the regression discontinuity design. We find drops in price discounts of privatization deals and jumps in efficiency for privatized SOEs when local politicians lose connections to Central Committee members around the retirement age cut-offs.
Subjects: 
patronage connection
rent-seeking
privatization
China
JEL: 
D73
G30
L3
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-347-8
Document Type: 
Working Paper

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