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Institutional environment and private entrepreneurs' political connections

Authors Ma, Chicheng
Issue Date 2008
Summary This paper examines the impact of government discrimination, a prevalent institutional obstacle faced by private enterprises in China, on private entrepreneurs’ political connections in the industrial sector. Since government discrimination is endogenous due to reverse causality, omitted variables bias and measurement errors, we use regional differences in mineral abundance as the instrumental variable, reasoning that mineral abundance affects regional differences in the dominance of state-owned industries, which further affects government discrimination against industrial private enterprises. The IV regressions indicate that government discrimination has a substantial impact on private entrepreneurs’ political connections. This impact is proved to be not driven by other underlying factors. Through this study we provide a new micro level example to examine the role of institution but linking it to the exogenous factor endowments.
Note Thesis (M.Phil.)--Hong Kong University of Science and Technology, 2008
Language English
Format Thesis
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