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The effect of different government subsidies on total-factor productivity: Evidence from private listed manufacturing enterprises in China

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  • Dongmei Wang
  • Yangyang Sun

Abstract

Private enterprises play an increasingly important role in China. They can improve the total-factor productivity (TFP) and help transform and upgrade industrial structures. This study uses data for private listed manufacturing companies from 2009 to 2017 to examine the effects of different types of subsidies on TFP. We also analyze the heterogeneity and specific mechanism of subsidy effects. We find that R&D subsidies and production subsidies positively affect private enterprises’ TFP. Moreover, R&D subsidies and production subsidies lagged by one period can also significantly increase private enterprises’ TFP. In terms of industry, R&D subsidies have more obvious effects on technology-intensive industries, while production subsidies have more significant effects on labor-intensive and capital-intensive industries. In terms of scale, R&D subsidies’ effects on the TFP of medium-sized enterprises are the largest, while production subsidies have the greatest effect on small enterprises’ TFP. Government subsidies increase private enterprises’ TFP through two mechanisms: improving technological innovation capability and alleviating financing constraints. Our results suggest that governments should formulate different subsidy policies according to industry and enterprise scale.

Suggested Citation

  • Dongmei Wang & Yangyang Sun, 2022. "The effect of different government subsidies on total-factor productivity: Evidence from private listed manufacturing enterprises in China," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-19, January.
    • Handle: RePEc:plo:pone00:0263018
    DOI: 10.1371/journal.pone.0263018
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