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Industrial Agglomeration, Enterprise's Age and Government Subsidies

【Authors】
YUAN Deyu, LI Degang & SONG Xiaoning
【WorkUnit】
YUAN Deyu (University of International Business and Economics, 100029)
LI Degang (Beijing International Studies University, 100024)
SONG Xiaoning (Sun Yat-sen University, 510275)
【Abstract】

In this paper, we investigate the effects of industrial agglomeration and enterprise's age on the government subsidies based on the data from 1998 to 2007 of the Chinese Annual Survey of Industrial Firms. The conclusions reveal that the industrial agglomeration has a significantly positive effect on the governments' subsidies on the whole; the effect of enterprise's age on governments subsidies presents an “inverted U” shape, which means that it is more difficult for the startups to obtain the subsides than mature enterprises. In further analysis, we find that the effect of industrial agglomeration on government subsidies is different among regions and among the enterprises of different ownership since the enterprises in Eastern China and the nongovernmental ones receive more subsidies. These conclusions have important implications: On one hand, the government subsidies to enterprises in the areas with a high degree of industrial agglomeration should be reduced to maintain fair market competition and to curb the widening development gaps between regions; on the other hand, financial subsidies for startups should be increased to enable them to innovate and create jobs.

JEL:H23, R53

【KeyWords】
Industrial Agglomeration, Enterprises Age, Government Subsidies, Tobit Model