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.

Philippe Aghion, Jing Cai, Mathias Dewatripont, Luosha Du, Ann Harrison and Patrick Legros

1 July 2022

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This work is published under POID and the CEP's Growth programme.