Journal of Political Institutions and Political Economy > Vol 4 > Issue 2

Good Friends versus Best Friends: How Different Types of Political Connection Work in China

Qing Chang, Department of Political Science, University of Pittsburgh, USA, QIC47@pitt.edu
 
Suggested Citation
Qing Chang (2023), "Good Friends versus Best Friends: How Different Types of Political Connection Work in China", Journal of Political Institutions and Political Economy: Vol. 4: No. 2, pp 259-285. http://dx.doi.org/10.1561/113.00000078

Publication Date: 23 Aug 2023
© 2023 Q. Chang
 
Subjects
Bureaucracy: Public Administration,  Bureaucracy,  Comparative Political Economy,  Comparative Politics,  Political Corruption,  Political Economy,  Political Networks,  Industrial Organization: Auctions,  Public Economics: Public Finance
 
Keywords
Political connectionlandauctionChinese politics
 

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In this article:
Introduction 
Theory and Hypotheses 
Data and Variable Construction 
Empirical Strategy 
Results 
Unpacking the Mechanism 
Effects of Anti-Corruption Campaign 
Conclusion 
References 

Abstract

This paper differentiates four mechanisms that link firms’ political connections to economic rents and unpacks channels through which firms obtain benefits from political ties. Using Chinese publicly listed firms’ land transaction data as well as a comprehensive dataset of their different types of connections, I differentiate how firms’: (1) reputation, (2) local political influence, (3) access to information, and (4) institutional embeddedness affect land prices and the ways in which firms purchase land. I find that firms with local political influence enjoy a 31% land price discount, the largest compared to other types of connections. More importantly, local connections enable firms to enter into auctions in which they can manipulate land prices before and during the auctions, while firms with good reputations benefit only from restricting potential competitors. My findings demonstrate that different types of political connections differ both in the magnitude of their impacts and the mechanisms by which they work.

DOI:10.1561/113.00000078