Industrial Policy and Competition

  • Philippe Aghion
    Department of Economics, Harvard University, Littauer Center 22, 1805 Cambridge Street, Cambridge, MA 02138, and National Bureau of Economic Research (NBER) (e-mail: )
  • Jing Cai
    Department of Economics, University of Michigan, 611 Tappan Street, 365A Lorch Hall, Ann Arbor, MI 48109 (e-mail: )
  • Mathias Dewatripont
    Banque National de Belgique and Université libre de Bruxelles (ECARES), 50 avenue F.D. Roosevelt, C.P. 114-04, 1050 Bruxelles, Belgique (e-mail: )
  • Luosha Du
    China Development Bank, 18 fuxingmen neidajie, xichengqu, Beijing, China 100031 (e-mail: )
  • Ann Harrison
    The Wharton School, University of Pennsylvania, 2016 Steinberg Hall-Dietrich Hall, Philadelphia, Pennsylvania 19104, and NBER (e-mail: )
  • Patrick Legros
    Université libre de Bruxelles (ECARES), 50 avenue F.D. Roosevelt, C.P. 114-04, 1050 Bruxelles, Belgium (e-mail: )

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<jats:p> Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2007, we show that industrial policies allocated to competitive sectors or that foster competition in a sector increase productivity growth. We measure competition using the Lerner Index and include as industrial policies subsidies tax holidays, loans, and tariffs. Measures to foster competition include policies that are more dispersed across firms in a sector or measures that encourage younger and more productive enterprises. (JEL L11, L25, L52, O14, O25, O47, P31) </jats:p>

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