Institutional Analysis Of The Effectiveness Of Financial Subsidies In Industrial Development

The debate between Lin and Zhang reflects that there is a lot of controversy on the evaluation of the financial subsidy effect supporting industrial development in China in the academic circle.The frequent occurrence of cheating subsidy for new energy vehicles and other events reflects that the industrial subsidy effect is not ideal.This paper mainly explores the status,causes,influences and solutions of this inefficient subsidy system.The inefficient subsidy system is reflected in the following aspects: from the perspective of industrial and technological policies,the scale of financial subsidy is large,the implementation of R&D funds is not clear,and there is a large gap between R&D output and input compared with other countries;From the perspective of industrial organization policies,it is still the mainstream in China to support large enterprises and improve market concentration.From the perspective of industrial structure policies,the feature of selective intervention is obvious,especially the administrative and mandatory planning as the main means.However,the imbalance of industrial development supported by industrial policies is relatively prominent,which is likely to lead to overcapacity and weak market adaptability.From the perspective of means,administrative intervention and direct subsidies are still the mainstream,and the effect is not significant,which will lead to the dependence of the development of enterprises and industries,and it is difficult to form market competitiveness.In addition,the current industrial fiscal subsidy policies often produce the phenomenon of "cheating",which not only causes the waste of subsidy resources,but also gives negative incentives to the production innovation of enterprises,and finally makes the industrial policies deviate from the original intention of formulation.This paper is innovative in analyzing the causes and influences of inefficient subsidy system.From the perspective of New Institutional Economics,this paper puts forward three key factors: interpersonal relationship,rent-seeking and open access,and explains the inefficiency of China’s current subsidy system around the three key factors.Specifically,since interpersonal relationship can provide trust guarantee in cooperation,China’s impersonality is embedded in the development of interpersonal relationship,so the social exchange system is essentially interpersonal,industrial policy also has the characteristics of interpersonal exchange;Industrial policies dominated by financial subsidies are rent-seeking due to the influence of informal system on formal system and the difference of social reward structure.China is in the state of right restriction order,in which industrial policies have insufficient support for innovation and competition,and institutional adaptability efficiency is not high.By analyzing the social order and the industrial policy of China,Japan,South Korea,the United States and other countries,it is deemed that the United States is characterized by impersonality relationship,profit-seeking and open access.Its industrial policies are often dominated by market mechanisms,and the system is highly adaptive and efficient;Due to the core political organization being made up by shortof interpersonal exchange to make industrial policy,Japan and Korea achieved obvious economic growth,the positive effects of the profit-seeking offset the negative impact of rent-seeking,but did not fully realize the impersonality exchange,they are still the limited access order,selective industrial policy has brought social corruption problems;In contrast,China’s current selective industrial policies,mainly based on subsidies,are characterized by interpersonal exchange and rent-seeking,the rights of organization operation is limited,and it is harder to achieve sustainable social and economic development.It is the time to achieve the transform from selective industrial policies into functional policies.Therefore,successful industrial policies must be impersonality,profit-seeking and open access,while failed industrial policies are usually unable to develop impersonality exchanges in core political organizations,so they have serious rent-seeking and restrictive rights.Furthermore,through systematic analysis of the political efficiency and economic efficiency of current subsidy policies,this paper verifies the correlation between the inefficiency of China’s subsidy system and three key factors.Firstly,in terms of political efficiency,through the investigation of political procedures,it is realized that the collusion between government and enterprise caused by interpersonal subsidies in China leads to high transaction costs and inefficient subsidy system.Specifically,1.Investigate ex-ante representative enterprise hidden the signal of industry development ability to make the subsidies resources mismatch behavior of central government,there are four refined Bayesian-Nash equilibrium solutions,after comparison found that if the enterprise disguise cost is small,and the government doesn’t check the high subsidies even all applying,subsidy system efficiency is low;2.Investigate ex-post hidden subsidies behaviors in "the central government,local government and enterprise" triple principal-agent relations,which lead to the phenomenon such as enterprise "cheating subsidies" and government "recovered",found that affected by the conspiracy of government and enterprises,local governments allocated subsidies policy and implement recovery is invalid,the central government subsidies to use system effectively,full amount must be paid for the information rent of local government and enterprises;However,the efficiency of subsidy use depends on the difficulty of industrial development construction and the strength of the central government’s implementation of recovery.Other conditions are invariant,if the scale of industrial construction projects is larger and the intensity of recovery is more severe,the efficiency of subsidy use system will be lower.Secondly,in terms of economic efficiency,from three aspects: enterprise,industry,market,combing three key factors,using the A-share listed companies in our country government subsidies in 2008-2016 data,analysis the influence of that current subsidy system with interpersonal exchange impact on the enterprise productivity,the influence of rent-seeking impact on investment efficiency,as well as the extractive right impact on the adaptability efficiency of subsidies system.Specifically,1.In terms of the effects of subsidies to the enterprise productivity,according to current status of domestic subsidies,the Chinese government subsidies on industry development can be divided into interpersonally subsidies and impersonality subsidies,using the related theory of New Institutional Economics to establish a theoretical analysis framework,aims to illustrate the relationship of the subsidy system hinder countries achieve the goal of social output value maximization,and according to the theoretical framework it is established with inefficient influence factors of the stochastic frontier model,adding an robustness analysis with Heckman sample selection model,the empirical results show that:(1)By comparison with indirect subsidy,direct subsidy has negative impact on production technical efficiency;(2)The mechanism that causes the inefficient outcome of subsidy is realized through rent-seeking,and this mechanism embodies the negative impact of the personality subsidy institution on social development,political connections plays a subtle role to adjust such mechanism.2.When exploring the rent-seeking nature of selective subsidies and the profit-seeking nature of functional subsidies,the fixed effect,Logit and Tobit models were used to study the impact of government subsidies on investment decisions of enterprises,and it was found that selective subsidies had obvious interpersonal exchange characteristics;Based on the sample test of whether an enterprise has rent-seeking behavior or political connection,it is found that under the interpersonal relationship,selective subsidies are rent-seeking and will occupy productive capital,which is manifested as insufficient investment,while functional subsidies are profit-seeking and generally lead to excessive investment in production;This part of the study also found that political connection,as an "embedded and independent" governance mode,would promote enterprise investment more than rent seeking in interpersonal exchange;At the industrial level,by studying the influence of distribution characteristics of the two types of subsidies on industrial structure,it is found that selective subsidies will reduce market competitiveness to a greater extent.Return to the enterprise level to explore the mechanism,through the Logit mediation effect model and interaction item test,it is found that early selective subsidies increase the probability of insufficient investment of enterprises,increase the possibility of market share decline,and thus reduce market competitiveness;However,although insufficient investment will increase the risk of the delisting,the selective subsidy under rent-seeking will reduce the possibility of enterprises exit from the market.Therefore,the market competition mechanism is easily disturbed by the selective subsidy under interpersonal relationship.3.In exploring the impact of subsidies on adaptive efficiency,combining with north’s research on social order theory,this paper makes a judgment on the allocation efficiency and adaptive efficiency of China’s subsidy system by analyzing the nature of China’s subsidy system and the mechanism of its effect on enterprise productivity.The marginal contribution of this part is to point out the phenomenon that the allocation efficiency and adaptability efficiency are not unified in China’s financial subsidy system.The research found that :(1)Although enterprises with low productivity or low profitability can be greatly affected by subsidized resources,theyactually enjoy relatively few subsidized resources,and the subsidy system has certain imbalance in allocation;(2)Compared with indirect subsidy systems such as tax incentives,direct fiscal subsidies have a circle effect,that is,they are characterized by interpersonal exchange,mainly reflected in non-state-owned enterprises and low-scale subsidies;(3)circle subsidies do not support the development of enterprises’ innovation ability and the improvement of the degree of market competition,which will hinder the development of market economy and make the adaptive efficiency of subsidy system low;(4)indirect subsidy institution has allocation efficiency as well as adaptive efficiency.Therefore,the current industrial policy dominated by financial subsidies will reduce the production efficiency,investment efficiency of enterprises,and the system adaptability efficiency is not high,so it is in urgent need of transformation.This thesis believes that the transformation of industrial policy system needs to break through three key factors,namely interpersonal relationship,rent-seeking and restrictive rights,which means to develop non-interpersonal relationships in social networks,increase institutional credibility,and improve socialist democracy and rule of law.We should reduce direct government intervention in the economy,guide the structure of social compensation to stimulate productive activities and increase profit-seeking income.The first priority is to change the way of government intervention and develop a functional subsidy system based on guidance and service.