Stimulated political decisions: local leadership turnover and firm subsidies in China

Abstract How do politicians distribute government resources in regimes with no electoral considerations? We propose that new minimize political risks by favoring politically important actors: state-owned enterprises (SOEs), but they adjust their behavior as establish personal ties private businesses. Using firm-level subsidies data after the 2008 stimulus China, we find provincial governors, immediately taking office, a significantly larger proportion of to SOEs relative firms. The effect attenuates governors learn about local conditions and connections suggestive evidence who adopt such strategy are more likely be promoted. Contrary conventional wisdom state always favors firms, show benefit from package only short-run.