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Trade policy uncertainty, political connection and government subsidy: Evidence from Chinese energy firms

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  • Li, Xiao-Lin
  • Li, Jingya
  • Wang, Jia
  • Si, Deng-Kui

Abstract

This paper analyzes the causal relationship between trade policy uncertainty, government subsidies, and the role of political connections using annual data on Chinese energy firms from 2003 to 2018. The results show that when trade policy uncertainty increases, the Chinese government tends to increase subsidies for energy firms, and firms with political ties may receive more subsidies. Furthermore, firms with poor sales performance and in less marketized regions will be granted even more subsidies when uncertainty rises and firms are politically connected. We also observe that subsidies promote firms' fixed asset investments and innovations but decrease their overall investment efficiency.

Suggested Citation

  • Li, Xiao-Lin & Li, Jingya & Wang, Jia & Si, Deng-Kui, 2021. "Trade policy uncertainty, political connection and government subsidy: Evidence from Chinese energy firms," Energy Economics, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:eneeco:v:99:y:2021:i:c:s0140988321001778
    DOI: 10.1016/j.eneco.2021.105272
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