Connect to invest: Hometown ties, intercity capital flows, and allocative efficiency in China

Shi, Xiangyu and Liu, Yu (2024): Connect to invest: Hometown ties, intercity capital flows, and allocative efficiency in China.

Abstract

This paper establishes a novel argument that social networks among local politicians reduce spatial frictions of corporate investment. We leverage the replacement of city officials and the resulting exogenous variations of hometown ties among city party secretaries to examine their impact on intercity capital flows in China. The results provide strong evidence that such connections significantly enhance capital flows between cities. These social bonds appear to effectively lower entry barriers for businesses and offer sustained support to connected firms without negatively impacting unconnected ones. Our research indicates that the increase in hometown-related investments does not displace non-hometown-related investments.

• Item Type: MPRA Paper
• Language: English
• Keywords: hometown ties, capital flow, transaction costs, rent seeking, economic growth
• Subjects: D - Microeconomics > D2 - Production and Organizations; D - Microeconomics > D7 - Analysis of Collective Decision-Making; G - Financial Economics > G1 - General Financial Markets; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

References

@article{berry1995automobile, title={Automobile prices in market equilibrium}, author={Berry, Steven and Levinsohn, James and Pakes, Ariel}, journal={Econometrica: Journal of the Econometric Society}, pages={841--890}, year={1995}, publisher={JSTOR} }

@article{gourinchas2013capital, title={Capital flows to developing countries: The allocation puzzle}, author={Gourinchas, Pierre-Olivier and Jeanne, Olivier}, journal={Review of Economic Studies}, volume={80}, number={4}, pages={1484--1515}, year={2013}, publisher={Oxford University Press} }

@article{stulz1981effects, title={On the effects of barriers to international investment}, author={Stulz, Rene M}, journal={The Journal of Finance}, volume={36}, number={4}, pages={923--934}, year={1981}, publisher={Wiley Online Library} }

@article{lucas1990vwhy, title={Why Doesnpt Capital Flow from Rich to Poor Countries?}, author={Lucas, Robert E}, journal={American Economic Review}, volume={80}, number={2}, pages={92-96}, year={1990} }

@article{berry1994estimating, title={Estimating discrete-choice models of product differentiation}, author={Berry, Steven T}, journal={The RAND Journal of Economics}, pages={242--262}, year={1994}, publisher={JSTOR} }

@article{shi2021anti, title={How Are Anti-corruption Shocks Transmitted in Social Networks: the Role of Intra-factional Competition}, author={Shi, Xiangyu}, year={2021} }

@article{shi2021moving, title={"Moving Umbrella": Bureaucratic transfers and the comovement of interregional investments in China}, author={Shi, Xiangyu and Xi, Tianyang and Zhang, Xiaobo and Zhang, Yifan}, year={2021}, journal={Journal of Development Economics}, volume={153}, pages={102717}, month={November}, }

@article{shi2020hometown, title={Hometown Favoritism and Intercity Investment Networks in China}, author={Shi, Xiangyu}, journal={Available at SSRN 3745064}, year={2022} }

@techreport{fisman2019social, title={Social Ties and the Selection of China's Political Elite}, author={Fisman, Raymond and Shi, Jing and Wang, Yongxiang and Wu, Weixing and others}, journal={American Economic Review}, volume={110}, number={6}, pages={1752--81}, year={2020}, }

@article{francois2023factions, title={Factions in nondemocracies: Theory and evidence from the Chinese Communist Party}, author={Francois, Patrick and Trebbi, Francesco and Xiao, Kairong}, journal={Econometrica}, volume={91}, number={2}, pages={565--603}, year={2023}, publisher={Wiley Online Library} }

@article{jia2015political, title={Political selection in China: The complementary roles of connections and performance}, author={Jia, Ruixue and Kudamatsu, Masayuki and Seim, David}, journal={Journal of the European Economic Association}, volume={13}, number={4}, pages={631--668}, year={2015}, publisher={Oxford University Press} }

@article{shih2012getting, title={Getting ahead in the communist party: explaining the advancement of central committee members in China}, author={Shih, Victor and Adolph, Christopher and Liu, Mingxing}, journal={American Political Science Review}, volume={106}, number={1}, pages={166--187}, year={2012}, publisher={Cambridge University Press} }

@article{jiang2020friends, title={Friends with benefits: Patronage networks and distributive politics in China}, author={Jiang, Junyan and Zhang, Muyang}, journal={Journal of Public Economics}, volume={184}, pages={104143}, year={2020}, publisher={Elsevier} }

@article{goel2007corrupt, title={Are corrupt acts contagious?: Evidence from the United States}, author={Goel, Rajeev K and Nelson, Michael A}, journal={Journal of Policy Modeling}, volume={29}, number={6}, pages={839--850}, year={2007}, publisher={Elsevier} }

@article{dong2012corruption, title={Corruption and social interaction: Evidence from China}, author={Dong, Bin and Torgler, Benno}, journal={Journal of Policy Modeling}, volume={34}, number={6}, pages={932--947}, year={2012}, publisher={Elsevier} }

@article{aidt2003economic, title={Economic analysis of corruption: a survey}, author={Aidt, Toke S}, journal={The Economic Journal}, volume={113}, number={491}, pages={F632--F652}, year={2003}, publisher={Oxford University Press Oxford, UK} }

@article{calvo2004social, title={Social networks and crime decisions: The role of social structure in facilitating delinquent behavior}, author={Calv{\'o}-Armengol, Antoni and Zenou, Yves}, journal={International Economic Review}, volume={45}, number={3}, pages={939--958}, year={2004}, publisher={Wiley Online Library} }

@inproceedings{gehlbach2001social, title={Social networks and corruption}, author={Gehlbach, Scott}, booktitle={Meeting of the American Political Science Association, San Francisco}, year={2001} }

@article{ballester2010delinquent, title={Delinquent networks}, author={Ballester, Coralio and Zenou, Yves and Calv{\'o}-Armengol, Antoni}, journal={Journal of the European Economic Association}, volume={8}, number={1}, pages={34--61}, year={2010}, publisher={Oxford University Press} }

@article{momotenko2015investigating, title={Investigating the Peer Effect of Corruption}, author={Momotenko, Iryna}, year={2015}, publisher={Center for Economic Research and Graduate Education} }

@article{calvo2005peer, title={Peer effects and social networks in education and crime}, author={Calv{\'o}-Armengol, Antoni and Patacchini, Eleonora and Zenou, Yves}, year={2005}, publisher={CEPR Discussion Paper} }

@article{glaeser1996crime, title={Crime and social interactions}, author={Glaeser, Edward L and Sacerdote, Bruce and Scheinkman, Jose A}, journal={The Quarterly Journal of Economics}, volume={111}, number={2}, pages={507--548}, year={1996}, publisher={MIT Press} }

@article{fisman2018social, title={Social ties and favoritism in Chinese science}, author={Fisman, Raymond and Shi, Jing and Wang, Yongxiang and Xu, Rong}, journal={Journal of Political Economy}, volume={126}, number={3}, pages={1134--1171}, year={2018}, publisher={University of Chicago Press Chicago, IL} }

@article{luo2008changing, title={The changing Chinese culture and business behavior: The perspective of intertwinement between guanxi and corruption}, author={Luo, Yadong}, journal={International Business Review}, volume={17}, number={2}, pages={188--193}, year={2008}, publisher={Elsevier} }

@article{li2011performing, title={Performing bribery in China: Guanxi-practice, corruption with a human face}, author={Li, Ling}, journal={Journal of Contemporary China}, volume={20}, number={68}, pages={1--20}, year={2011}, publisher={Taylor \& Francis} }

@article{shleifer1993corruption, title={Corruption}, author={Shleifer, Andrei and Vishny, Robert W}, journal={The quarterly journal of economics}, volume={108}, number={3}, pages={599--617}, year={1993}, publisher={MIT Press} }

@article{acemoglu2015systemic, title={Systemic risk and stability in financial networks}, author={Acemoglu, Daron and Ozdaglar, Asuman and Tahbaz-Salehi, Alireza}, journal={American Economic Review}, volume={105}, number={2}, pages={564--608}, year={2015} }

@article{elliott2014financial, title={Financial networks and contagion}, author={Elliott, Matthew and Golub, Benjamin and Jackson, Matthew O}, journal={American Economic Review}, volume={104}, number={10}, pages={3115--53}, year={2014} }

@article{acemoglu2012network, title={The network origins of aggregate fluctuations}, author={Acemoglu, Daron and Carvalho, Vasco M and Ozdaglar, Asuman and Tahbaz-Salehi, Alireza}, journal={Econometrica}, pages={1977--2016}, year={2012}, publisher={JSTOR} }

@article{allen2000financial, title={Financial contagion}, author={Allen, Franklin and Gale, Douglas}, journal={Journal of political economy}, volume={108}, number={1}, pages={1--33}, year={2000}, publisher={The University of Chicago Press} }

@techreport{lin2016anti, title={Anti-corruption reforms and shareholder valuations: Event study evidence from China}, author={Lin, Chen and Morck, Randall and Yeung, Bernard and Zhao, Xiaofeng}, year={2016}, institution={National Bureau of Economic Research} }

@article{shu2017alcohol, title={"Alcohol Bans": Can they reveal the effect of Xi Jinping's anti-corruption campaign?}, author={Shu, Yang and Cai, Jiayao}, journal={European Journal of Political Economy}, volume={50}, pages={37--51}, year={2017}, publisher={Elsevier} }

@article{li2017enforcement, title={Enforcement and political power in anticorruption: Evidence from China}, author={Li, Li and Lien, Donald and Wu, Yiping and Zhao, Yang}, journal={World Development}, volume={98}, pages={133--147}, year={2017}, publisher={Elsevier} }

@article{xu2017does, title={How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China}, author={Xu, Gang and Yano, Go}, journal={Journal of Comparative Economics}, volume={45}, number={3}, pages={498--519}, year={2017}, publisher={Elsevier} }

@article{lan2018swiss, title={Swiss watch cycles: Evidence of corruption during leadership transition in China}, author={Lan, Xiaohuan and Li, Wei}, journal={Journal of Comparative Economics}, volume={46}, number={4}, pages={1234--1252}, year={2018}, publisher={Elsevier} }

@article{qian2015impact, title={The impact of Xi Jinping's anti-corruption campaign on luxury imports in China}, author={Qian, Nancy and Wen, Jaya}, journal={Preliminary Draft, Yale University}, year={2015} }

@incollection{benoit2008intra, title={Intra-party politics and coalition governments: Concluding remarks}, author={Benoit, Kenneth and Giannetti, Daniela}, booktitle={Intra-party Politics and Coalition Governments}, pages={245--252}, year={2008}, publisher={Routledge} }

@book{brumfiel2003factional, title={Factional competition and political development in the New World}, author={Brumfiel, Elizabeth M and Fox, John W}, year={2003}, publisher={Cambridge University Press} }

@techreport{chen2016enemies, title={The Enemies Within: Loyalty, Faction and Elite Competition under Authoritarianism}, author={Chen, Ting and Hong, Ji Yeon}, journal={Political Science Research and Methods}, volume={9}, number={3}, pages={1--16}, year={2020}, }

@book{huang2006factionalism, title={Factionalism in Chinese communist politics}, author={Huang, Jing}, year={2006}, publisher={Cambridge University Press} }

@article{hong2018factional, title={Factional Competition and Power Sharing under Authoritarianism}, author={Hong, Ji Yeon and Yang, Leo Y}, year={2018} }

@article{boucek2009rethinking, title={Rethinking factionalism: typologies, intra-party dynamics and three faces of factionalism}, author={Boucek, Fran{\c{c}}oise}, journal={Party Politics}, volume={15}, number={4}, pages={455--485}, year={2009}, publisher={SAGE Publications Sage UK: London, England} }

@article{keller2016moving, title={Moving beyond factions: using social network analysis to uncover patronage networks among Chinese elites}, author={Keller, Franziska Barbara}, journal={Journal of East Asian Studies}, volume={16}, number={1}, pages={17--41}, year={2016}, publisher={Cambridge University Press} }

@article{mo2001corruption, title={Corruption and economic growth}, author={Mo, Pak Hung}, journal={Journal of comparative economics}, volume={29}, number={1}, pages={66--79}, year={2001}, publisher={Elsevier} }

@article{mauro1995corruption, title={Corruption and growth}, author={Mauro, Paolo}, journal={The quarterly journal of economics}, volume={110}, number={3}, pages={681--712}, year={1995}, publisher={MIT Press} }

@article{barro1990government, title={Government Spending in a Simple Model of Endogenous Growth}, author={Barro, Robert J}, journal={Journal of Political Economy}, volume={98}, number={5 pt 2}, year={1990}, publisher={Citeseer} }

@article{levine1992sensitivity, title={A sensitivity analysis of cross-country growth regressions}, author={Levine, Ross and Renelt, David}, journal={The American economic review}, pages={942--963}, year={1992}, publisher={JSTOR} }

@article{barro2001education, title={Education and economic growth}, author={Barro, Robert J}, journal={The contribution of human and social capital to sustained economic growth and well-being}, pages={14--41}, year={2001}, publisher={OECD} }

@article{li2005political, title={Political turnover and economic performance: the incentive role of personnel control in China}, author={Li, Hongbin and Zhou, Li-An}, journal={Journal of Public Economics}, volume={89}, number={9-10}, pages={1743--1762}, year={2005}, publisher={Elsevier} }

@article{xu2011fundamental, title={The fundamental institutions of China's reforms and development}, author={Xu, Chenggang}, journal={Journal of Economic Literature}, volume={49}, number={4}, pages={1076--1151}, year={2011} }

@article{yao2015subnational, title={Subnational leaders and economic growth: evidence from Chinese cities}, author={Yao, Yang and Zhang, Muyang}, journal={Journal of Economic Growth}, volume={20}, number={4}, pages={405--436}, year={2015}, publisher={Springer} }

@techreport{ding2020equilibrium, title={Equilibrium consequences of corruption on firms: Evidence from china's anti-corruption campaign}, author={Ding, Haoyuan and Fang, Hanming and Lin, Shu and Shi, Kang}, year={2020}, institution={National Bureau of Economic Research} }

@article{chen2020corruption, title={Is a Corruption Crackdown Really Good for the Economy? Firm-Level Evidence from China}, author={Chen, Zhiyuan and Jin, Xin and Xu, Xu}, year={2020} }

@article{li2014xi, title={Xi Jinping's inner circle (Part 1: the Shaanxi gang)}, author={Li, Cheng}, year={2014} }

@article{shi2020social, title={Social Ties and Corruption: Evidence from China}, author={Shi, Xiangyu}, year={2020} }

@article{besley2011educated, title={Do educated leaders matter?}, author={Besley, Timothy and Montalvo, Jose G and Reynal-Querol, Marta}, journal={The Economic Journal}, volume={121}, number={554}, pages={F205--227}, year={2011}, publisher={Oxford University Press Oxford, UK} }

@article{shi2020better, title={Better Than On-the-job Training: National Executive's Political Experience And Economic Performance}, author={Shi, Xiangyu and Xi, Tianyang and Yao, Yang}, year={2020} }

@article{banerjee2013diffusion, title={The diffusion of microfinance}, author={Banerjee, Abhijit and Chandrasekhar, Arun G and Duflo, Esther and Jackson, Matthew}, journal={Science}, volume={341}, number={6144}, year={2013}, publisher={American Association for the Advancement of Science} }

@article{wang2019frightened, title={Frightened mandarins: The adverse effects of fighting corruption on local bureaucracy}, author={Wang, Erik}, journal={Available at SSRN 3314508}, year={2019} }

@article{kung2014, title={The emperor strikes back: Political status, career incentives and grain procurement during china’s great leap famine}, author={Kung, James}, journal={Political Science Research and Methods}, volume={2}, number={2}, pages={179--211}, year={2014}, }

@article{nathan1973, title={A Factionalism Model of CCP Politics}, author={Nathan, Andrew}, journal={China Quarterly}, volume={53}, pages={34--66}, year={1973}, }

@article{shih2007, title={Factions and Finance in China: Elite Conflict and Inflation}, author={Shih, Victor}, journal={Cambridge University Press}, year={2007}, }

@article{bo2004, title={The 16th Central Committee of the Chinese Communist Party: formal institutions and factional groups}, author={Bo, Zhiyue}, journal={Journal of Contemporary China}, volume={13}, number={39}, pages={233--256}, year={2004}, }

@article{lungu2017, title={China’s 19th Party Congress: Projecting the Next Politburo Standing Committee}, author={Lungu, Andrei}, journal={The Diplomat}, year={2017}, }

@article{qiu2005, title={The Fifth Generation of CCP Leaders}, author={Qiu, Ping}, journal={Hong Kong: Xiafeier Publishing Company Limited}, year={2005}, }

@article{li2007, title={China’s Two Li’s: Frontrunners in the Race to Succeed Hu Jintao}, author={Li, Cheng}, journal={China Leadership Monitor}, volume={22}, pages={1-22}, year={2007}, }

@article{jiang2020, title={Friends with benefits: Patronage networks and distributive politics in China}, author={Junyan Jiang and Muyang Zhang}, journal={Journal of Public Economics}, volume={184}, pages={104143}, year={2020}, }

@article{dickens_aejep, Author = {Dickens, Andrew}, Title = {Ethnolinguistic Favoritism in African Politics}, Journal = {American Economic Journal: Applied Economics}, Volume = {10}, Number = {3}, Year = {2018}, Month = {July}, Pages = {370-402}, DOI = {10.1257/app.20160066}, URL = {https://www.aeaweb.org/articles?id=10.1257/app.20160066}}

@article{do_aejep, Author = {Do, Quoc-Anh and Nguyen, Kieu-Trang and Tran, Anh N.}, Title = {One Mandarin Benefits the Whole Clan: Hometown Favoritism in an Authoritarian Regime}, Journal = {American Economic Journal: Applied Economics}, Volume = {9}, Number = {4}, Year = {2017}, Month = {October}, Pages = {1-29}, DOI = {10.1257/app.20130472}, URL = {https://www.aeaweb.org/articles?id=10.1257/app.20130472}}

@article{bailey2018economic, title={The economic effects of social networks: Evidence from the housing market}, author={Bailey, Michael and Cao, Ruiqing and Kuchler, Theresa and Stroebel, Johannes}, journal={Journal of Political Economy}, volume={126}, number={6}, pages={2224--2276}, year={2018}, publisher={University of Chicago Press Chicago, IL} }

@article{jackson2017economic, title={The economic consequences of social-network structure}, author={Jackson, Matthew and Rogers, Brian W and Zenou, Yves}, journal={Journal of Economic Literature}, volume={55}, number={1}, pages={49--95}, year={2017} }

@article{jackson2014networks, title={Networks in the understanding of economic behaviors}, author={Jackson, Matthew}, journal={Journal of Economic Perspectives}, volume={28}, number={4}, pages={3--22}, year={2014} }

@article{haselmann2018rent, title={Rent seeking in elite networks}, author={Haselmann, Rainer and Schoenherr, David and Vig, Vikrant}, journal={Journal of Political Economy}, volume={126}, number={4}, pages={1638--1690}, year={2018}, publisher={University of Chicago Press Chicago, IL} }

@article{edin2003ethnic, title={Ethnic enclaves and the economic success of immigrants—Evidence from a natural experiment}, author={Edin, Per-Anders and Fredriksson, Peter and {\AA}slund, Olof}, journal={The Quarterly Journal of Economics}, volume={118}, number={1}, pages={329--357}, year={2003}, publisher={MIT Press} }

@article{shue2013executive, title={Executive networks and firm policies: Evidence from the random assignment of MBA peers}, author={Shue, Kelly}, journal={The Review of Financial Studies}, volume={26}, number={6}, pages={1401--1442}, year={2013}, publisher={Oxford University Press} }

@article{jackson2011social, title={Do social connections reduce moral hazard? Evidence from the New York City taxi industry}, author={Jackson, C Kirabo and Schneider, Henry S}, journal={American Economic Journal: Applied Economics}, volume={3}, number={3}, pages={244--67}, year={2011} }

@techreport{rehbein2020distance, title={Distance in bank lending: The role of social networks}, author={Rehbein, Oliver and Rother, Simon and others}, year={2020}, institution={University of Bonn and University of Mannheim, Germany} }

@article{jackson2017economic, title={The economic consequences of social-network structure}, author={Jackson, Matthew and Rogers, Brian W and Zenou, Yves}, journal={Journal of Economic Literature}, volume={55}, number={1}, pages={49--95}, year={2017} }

@article{jackson2014networks, title={Networks in the understanding of economic behaviors}, author={Jackson, Matthew}, journal={Journal of Economic Perspectives}, volume={28}, number={4}, pages={3--22}, year={2014} }

@article{burchardi2013economic, title={The economic impact of social ties: Evidence from German reunification}, author={Burchardi, Konrad B and Hassan, Tarek A}, journal={The Quarterly Journal of Economics}, volume={128}, number={3}, pages={1219--1271}, year={2013}, publisher={MIT Press} }

@article{greif1993contract, title={Contract enforceability and economic institutions in early trade: The Maghribi traders' coalition}, author={Greif, Avner}, journal={The American Economic Review}, pages={525--548}, year={1993}, publisher={JSTOR} }

@article{karlan2009trust, title={Trust and social collateral}, author={Karlan, Dean and Mobius, Markus and Rosenblat, Tanya and Szeidl, Adam}, journal={The Quarterly Journal of Economics}, volume={124}, number={3}, pages={1307--1361}, year={2009}, publisher={MIT Press} }

@article{rauch2002ethnic, title={Ethnic Chinese networks in international trade}, author={Rauch, James E and Trindade, Vitor}, journal={Review of Economics and Statistics}, volume={84}, number={1}, pages={116--130}, year={2002}, publisher={MIT Press 238 Main St., Suite 500, Cambridge, MA 02142-1046, USA journals~…} }

@article{calvo2004effects, title={The effects of social networks on employment and inequality}, author={Calvo-Armengol, Antoni and Jackson, Matthew}, journal={American Economic Review}, volume={94}, number={3}, pages={426--454}, year={2004} }

@article{fisman2018social, title={Social ties and favoritism in Chinese science}, author={Fisman, Raymond and Shi, Jing and Wang, Yongxiang and Xu, Rong}, journal={Journal of Political Economy}, volume={126}, number={3}, pages={1134--1171}, year={2018}, publisher={University of Chicago Press Chicago, IL} }

@article{fisman_hometown_monitoring_2021, Author = {Chu, Jian and Fisman, Raymond and Tan, Songtao and Wang, Yongxiang}, Title = {Hometown Ties and the Quality of Government Monitoring: Evidence from Rotation of Chinese Auditors}, Journal = {American Economic Journal: Applied Economics}, Volume = {13}, Number = {3}, Year = {2021}, Month = {July}, Pages = {176-201}, DOI = {10.1257/app.20190516}, URL = {https://www.aeaweb.org/articles?id=10.1257/app.20190516}}

@article{bai_jia_2022, Author = {Bai, Ying and Jia, Ruixue and Yang, Jiaojiao}, Title = {The Web of Power: How Elite Networks Shaped War and China}, Journal = {Working Paper}, Year = {2022}, }

@incollection{olson2008rise, title={The rise and decline of nations}, author={Olson, Mancur}, booktitle={The Rise and Decline of Nations}, year={2008}, publisher={Yale University Press} }

@book{robinson2012nations, title={Why Nations Fail: The Origins of Power, Prosperity and Poverty}, author={Robinson, James A and Acemoglu, Daron}, year={2012}, publisher={Profile London} }

@article{bandiera2009social, title={Social connections and incentives in the workplace: Evidence from personnel data}, author={Bandiera, Oriana and Barankay, Iwan and Rasul, Imran}, journal={Econometrica}, volume={77}, number={4}, pages={1047--1094}, year={2009}, publisher={Wiley Online Library} }

@article{banerjee2004efficiently, title={How efficiently is capital allocated? Evidence from the knitted garment industry in Tirupur}, author={Banerjee, Abhijit and Munshi, Kaivan}, journal={The Review of Economic Studies}, volume={71}, number={1}, pages={19--42}, year={2004}, publisher={Wiley-Blackwell} }

@book{fei1948soil, title={From the Soil: The Foundations of Chinese Society}, author={Fei, {Hsiao-tung}}, year={1947}, publisher={Centurial Comments} }

@article{chen2019busting, title={Busting the "Princelings": The campaign against corruption in China's primary land market}, author={Chen, Ting and Kung, James Kai-sing}, journal={The Quarterly Journal of Economics}, volume={134}, number={1}, pages={185--226}, year={2019}, publisher={Oxford University Press} }

@article{hao2020political, title={Political connection, corporate philanthropy and efficiency: Evidence from China's anti-corruption campaign}, author={Hao, Zhuoqun and Liu, Yu and Zhang, Jinfan and Zhao, Xiaoxue}, journal={Journal of Comparative Economics}, volume={48}, number={3}, pages={688--708}, year={2020}, publisher={Elsevier} }

@techreport{ding2020equilibrium, title={Equilibrium consequences of corruption on firms: Evidence from China’s anti-corruption campaign}, author={Ding, Haoyuan and Fang, Hanming and Lin, Shu and Shi, Kang}, year={2020}, institution={National Bureau of Economic Research} }

@article{hu2017china, title={China as number one? Evidence from China's most recent patenting surge}, author={Hu, Albert GZ and Zhang, Peng and Zhao, Lijing}, journal={Journal of Development Economics}, volume={124}, pages={107--119}, year={2017}, publisher={Elsevier} }

@article{he2018database, title={A database linking Chinese patents to China’s census firms}, author={He, Zi-Lin and Tong, Tony W and Zhang, Yuchen and He, Wenlong}, journal={Scientific data}, volume={5}, number={1}, pages={1--16}, year={2018}, publisher={Nature Publishing Group} }

@article{liu2020trade, title={Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession}, author={Liu, Qing and Ma, Hong}, journal={Journal of International Economics}, volume={127}, pages={103387}, year={2020}, publisher={Elsevier} }

@article{guo2009china, title={China's local political budget cycles}, author={Guo, Gang}, journal={American Journal of Political Science}, volume={53}, number={3}, pages={621--632}, year={2009}, publisher={Wiley Online Library} }

@Article{kou_tsai_2014, author = {Kou, {Chien-wen} and Tsai, {Wen-Hsuan} }, title = {``Sprinting with Small Steps'' Towards Promotion: Solutions for the Age Dilemma in the CCP Cadre Appointment System}, journal = {The China Journal}, year = {2014}, volume = {71}, pages = {155-175}, }

@article{xu_aer2018, Author = {Xu, Guo}, Title = {The Costs of Patronage: Evidence from the British Empire}, Journal = {American Economic Review}, Volume = {108}, Number = {11}, Year = {2018}, Month = {November}, Pages = {3170-98}, DOI = {10.1257/aer.20171339},}

@article{landry2018does, title={Does performance matter? Evaluating political selection along the Chinese administrative ladder}, author={Landry, Pierre F and L{\"u}, Xiaobo and Duan, Haiyan}, journal={Comparative Political Studies}, volume={51}, number={8}, pages={1074--1105}, year={2018}, publisher={SAGE Publications Sage CA: Los Angeles, CA} }

@article{an2016political, title={Political uncertainty and corporate investment: Evidence from China}, author={An, Heng and Chen, Yanyan and Luo, Danglun and Zhang, Ting}, journal={Journal of Corporate Finance}, volume={36}, pages={174--189}, year={2016}, publisher={Elsevier} }

@article{yu2016strategic, title={Strategic interaction in political competition: Evidence from spatial effects across Chinese cities}, author={Yu, Jihai and Zhou, Li-An and Zhu, Guozhong}, journal={Regional Science and Urban Economics}, volume={57}, pages={23--37}, year={2016}, publisher={Elsevier} }

@article{borusyak_2022, title={Revisiting Event Study Designs: Robust and Efficient Estimation}, author={Borusyak, Kirill and Jaravel, Xavier and Spiess, Jann}, journal={Working Paper}, year={2022}, }

@article{de2020two, title={Two-way fixed effects estimators with heterogeneous treatment effects}, author={De Chaisemartin, Cl{\'e}ment and d'Haultfoeuille, Xavier}, journal={American Economic Review}, volume={110}, number={9}, pages={2964--96}, year={2020} }

@book{huntington2006political, title={Political order in changing societies}, author={Huntington, Samuel P}, year={2006}, publisher={Yale university press} }

@article{jiang2020mandarins, title={Mandarins make markets: Leadership rotations and inter-provincial trade in China}, author={Jiang, Junyan and Mei, Yuan}, journal={Journal of Development Economics}, volume={147}, pages={102524}, year={2020}, publisher={Elsevier} }

@article{brandt2020barriers, title={Barriers to entry and regional economic growth in China}, author={Brandt, Loren and Kambourov, Gueorgui and Storesletten, Kjetil}, year={2020}, publisher={CEPR Discussion Paper No. DP14965} }

@article{acf2015, author = {Daniel A. Ackerberg and Kevin Caves and Garth Frazer}, journal = {Econometrica}, number = {6}, pages = {2411--2451}, publisher = {[Wiley, The Econometric Society]}, title = {IDENTIFICATION PROPERTIES OF RECENT PRODUCTION FUNCTION ESTIMATORS}, urldate = {2023-05-28}, volume = {83}, year = {2015} }

@article{conley1999gmm, title={GMM estimation with cross sectional dependence}, author={Conley, Timothy G}, journal={Journal of Econometrics}, volume={92}, number={1}, pages={1--45}, year={1999}, publisher={Elsevier} }

@article{hopenhayn1992entry, title={Entry, exit, and firm dynamics in long run equilibrium}, author={Hopenhayn, Hugo A}, journal={Econometrica: Journal of the Econometric Society}, pages={1127--1150}, year={1992}, publisher={JSTOR} }

@article{nian2023go, title={Go with the Politician}, author={Nian, Yongwei and Wang, Chunyang}, journal={American Economic Journal: Economic Policy}, volume={15}, number={2}, pages={467--496}, year={2023}, publisher={American Economic Association 2014 Broadway, Suite 305, Nashville, TN 37203-2425} }

@article{fisman2020social, title={Social ties and the selection of China's political elite}, author={Fisman, Raymond and Shi, Jing and Wang, Yongxiang and Wu, Weixing}, journal={American Economic Review}, volume={110}, number={6}, pages={1752--1781}, year={2020}, publisher={American Economic Association 2014 Broadway, Suite 305, Nashville, TN 37203} }

@article{zhang2023anti, title={Anti-corruption campaign, political connections, and court bias: Evidence from Chinese corporate lawsuits}, author={Zhang, Peng}, journal={Journal of Public Economics}, volume={222}, pages={104861}, year={2023}, publisher={Elsevier} }

@article{li2020political, title={Political investment cycles of state-owned enterprises}, author={Li, Qingyuan and Lin, Chen and Xu, Li}, journal={The Review of Financial Studies}, volume={33}, number={7}, pages={3088--3129}, year={2020}, publisher={Oxford University Press} }

@article{schoenherr2019political, title={Political connections and allocative distortions}, author={Schoenherr, David}, journal={The Journal of Finance}, volume={74}, number={2}, pages={543--586}, year={2019}, publisher={Wiley Online Library} }

@article{shue2013executive, title={Executive networks and firm policies: Evidence from the random assignment of MBA peers}, author={Shue, Kelly}, journal={The Review of Financial Studies}, volume={26}, number={6}, pages={1401--1442}, year={2013}, publisher={Oxford University Press} }

@article{khwaja2005lenders, title={Do lenders favor politically connected firms? Rent provision in an emerging financial market}, author={Khwaja, Asim Ijaz and Mian, Atif}, journal={The Quarterly Journal of Economics}, volume={120}, number={4}, pages={1371--1411}, year={2005}, publisher={MIT Press} }

@article{johnson2003cronyism, title={Cronyism and capital controls: evidence from Malaysia}, author={Johnson, Simon and Mitton, Todd}, journal={Journal of financial economics}, volume={67}, number={2}, pages={351--382}, year={2003}, publisher={Elsevier} }

@article{claessens2008political, title={Political connections and preferential access to finance: The role of campaign contributions}, author={Claessens, Stijn and Feijen, Erik and Laeven, Luc}, journal={Journal of Financial Economics}, volume={88}, number={3}, pages={554--580}, year={2008}, publisher={Elsevier} }

@article{amore2013value, title={The value of local political connections in a low-corruption environment}, author={Amore, Mario Daniele and Bennedsen, Morten}, journal={Journal of Financial Economics}, volume={110}, number={2}, pages={387--402}, year={2013}, publisher={Elsevier} }

@book{cao2020social, title={The social costs of patronage ties: Lessons from the 2008 Sichuan earthquake}, author={Cao, Yiming}, year={2020}, publisher={Boston University-Department of Economics} }

@article{duchin2012politics, title={The politics of government investment}, author={Duchin, Ran and Sosyura, Denis}, journal={Journal of Financial Economics}, volume={106}, number={1}, pages={24--48}, year={2012}, publisher={Elsevier} }

@article{cohen2008small, title={The small world of investing: Board connections and mutual fund returns}, author={Cohen, Lauren and Frazzini, Andrea and Malloy, Christopher}, journal={Journal of Political Economy}, volume={116}, number={5}, pages={951--979}, year={2008}, publisher={The University of Chicago Press} }

@article{chen2011government, title={Government intervention and investment efficiency: Evidence from China}, author={Chen, Shimin and Sun, Zheng and Tang, Song and Wu, Donghui}, journal={Journal of Corporate Finance}, volume={17}, number={2}, pages={259--271}, year={2011}, publisher={Elsevier} }

@article{espenlaub2012bank, title={Bank connections, corporate investment and crisis}, author={Espenlaub, Susanne and Khurshed, Arif and Sitthipongpanich, Thitima}, journal={Journal of Banking \& Finance}, volume={36}, number={5}, pages={1336--1353}, year={2012}, publisher={Elsevier} }

@article{shen2016political, title={Political connections, financial constraints, and corporate investment}, author={Shen, Chung-Hua and Lin, Chih-Yung}, journal={Review of Quantitative Finance and Accounting}, volume={47}, pages={343--368}, year={2016}, publisher={Springer} }

@article{bertrand2018cost, title={The cost of political connections}, author={Bertrand, Marianne and Kramarz, Francis and Schoar, Antoinette and Thesmar, David}, journal={Review of Finance}, volume={22}, number={3}, pages={849--876}, year={2018}, publisher={Oxford University Press} }

@article{johnson2003cronyism, title={Cronyism and capital controls: evidence from Malaysia}, author={Johnson, Simon and Mitton, Todd}, journal={Journal of financial economics}, volume={67}, number={2}, pages={351--382}, year={2003}, publisher={Elsevier} }

@article{sapienza2004effects, title={The effects of government ownership on bank lending}, author={Sapienza, Paola}, journal={Journal of financial economics}, volume={72}, number={2}, pages={357--384}, year={2004}, publisher={Elsevier} }

@article{faccio2006political, title={Political connections and corporate bailouts}, author={Faccio, Mara and Masulis, Ronald W and McConnell, John J}, journal={The Journal of Finance}, volume={61}, number={6}, pages={2597--2635}, year={2006}, publisher={Wiley Online Library} }

@article{khwaja2005lenders, title={Do lenders favor politically connected firms? Rent provision in an emerging financial market}, author={Khwaja, Asim Ijaz and Mian, Atif}, journal={The Quarterly Journal of Economics}, volume={120}, number={4}, pages={1371--1411}, year={2005}, publisher={MIT Press} }

@article{dincc2005politicians, title={Politicians and banks: Political influences on government-owned banks in emerging markets}, author={Din{\c{c}}, I Serdar}, journal={Journal of financial economics}, volume={77}, number={2}, pages={453--479}, year={2005}, publisher={Elsevier} }

@article{cohen2011powerful, title={Do powerful politicians cause corporate downsizing?}, author={Cohen, Lauren and Coval, Joshua and Malloy, Christopher}, journal={Journal of political Economy}, volume={119}, number={6}, pages={1015--1060}, year={2011}, publisher={University of Chicago Press Chicago, IL} }

@article{faccio2006politically, title={Politically connected firms}, author={Faccio, Mara}, journal={American Economic Review}, volume={96}, number={1}, pages={369--386}, year={2006}, publisher={American Economic Association} }

@article{shleifer1994politicians, title={Politicians and firms}, author={Shleifer, Andrei and Vishny, Robert W}, journal={The quarterly journal of economics}, volume={109}, number={4}, pages={995--1025}, year={1994}, publisher={MIT Press} }

@article{ovtchinnikov2012individual, title={Individual political contributions and firm performance}, author={Ovtchinnikov, Alexei V and Pantaleoni, Eva}, journal={Journal of Financial Economics}, volume={105}, number={2}, pages={367--392}, year={2012}, publisher={Elsevier} }

@article{kramarz2013social, title={Social networks in the boardroom}, author={Kramarz, Francis and Thesmar, David}, journal={Journal of the European Economic Association}, volume={11}, number={4}, pages={780--807}, year={2013}, publisher={Oxford University Press} }

@article{coval2001geography, title={The geography of investment: Informed trading and asset prices}, author={Coval, Joshua D and Moskowitz, Tobias J}, journal={Journal of political Economy}, volume={109}, number={4}, pages={811--841}, year={2001}, publisher={The University of Chicago Press} }

@techreport{bailey2016social, title={Social networks and housing markets}, author={Bailey, Michael and Cao, Ruiqing and Kuchler, Theresa and Stroebel, Johannes}, year={2016}, institution={National Bureau of Economic Research} }

@misc{bai2006return, title={The return to capital in China}, author={Bai, Chong-En and Hsieh, Chang-Tai and Qian, Yingyi}, year={2006}, publisher={National Bureau of Economic Research Cambridge, Mass., USA} }

@article{melitz2003impact, title={The impact of trade on intra-industry reallocations and aggregate industry productivity}, author={Melitz, Marc J}, journal={econometrica}, volume={71}, number={6}, pages={1695--1725}, year={2003}, publisher={Wiley Online Library} }

@techreport{liu2022judicial, title={Judicial independence, local protectionism, and economic integration: Evidence from China}, author={Liu, Ernest and Lu, Yi and Peng, Wenwei and Wang, Shaoda}, year={2022}, institution={National Bureau of Economic Research} }

@techreport{shi2022hometown, title={Hometown favoritism and intercity investment networks in china}, author={Shi, Xiangyu}, booktitle={Hometown Favoritism and Intercity Investment Networks in China: Shi, Xiangyu}, year={2022}, publisher={[Sl]: SSRN} }

@article{chen2021buying, title={Buying products from whom you know: personal connections and information asymmetry in supply chain relationships}, author={Chen, Ting and Levy, Hagit and Martin, Xiumin and Shalev, Ron}, journal={Review of Accounting Studies}, pages={1--40}, year={2021}, publisher={Springer} }

@article{cohen2008small, title={The small world of investing: Board connections and mutual fund returns}, author={Cohen, Lauren and Frazzini, Andrea and Malloy, Christopher}, journal={Journal of Political Economy}, volume={116}, number={5}, pages={951--979}, year={2008}, publisher={The University of Chicago Press} }

@article{engelberg2012friends, title={Friends with money}, author={Engelberg, Joseph and Gao, Pengjie and Parsons, Christopher A}, journal={Journal of Financial Economics}, volume={103}, number={1}, pages={169--188}, year={2012}, publisher={Elsevier} }

@article{karolyi2018personal, title={Personal lending relationships}, author={Karolyi, Stephen Adam}, journal={The Journal of Finance}, volume={73}, number={1}, pages={5--49}, year={2018}, publisher={Wiley Online Library} }

@article{luo2021china, title={China’s local political turnover in the Twenty-First Century}, author={Luo, Weijie and Qin, Shikun}, journal={Journal of Chinese Political Science}, pages={1--24}, year={2021}, publisher={Springer} }

@article{alcacer2016spatial, title={Spatial organization of firms and location choices through the value chain}, author={Alc{\'a}cer, Juan and Delgado, Mercedes}, journal={Management science}, volume={62}, number={11}, pages={3213--3234}, year={2016}, publisher={INFORMS} }

@article{coval1999home, title={Home bias at home: Local equity preference in domestic portfolios}, author={Coval, Joshua D and Moskowitz, Tobias J}, journal={The Journal of Finance}, volume={54}, number={6}, pages={2045--2073}, year={1999}, publisher={Wiley Online Library} }

@article{stein2002information, title={Information production and capital allocation: Decentralized versus hierarchical firms}, author={Stein, Jeremy C}, journal={The journal of finance}, volume={57}, number={5}, pages={1891--1921}, year={2002}, publisher={Wiley Online Library} }

@article{bernile2015home, title={Home away from home: Geography of information and local investors}, author={Bernile, Gennaro and Kumar, Alok and Sulaeman, Johan}, journal={The Review of Financial Studies}, volume={28}, number={7}, pages={2009--2049}, year={2015}, publisher={Oxford University Press} }

@article{chen2024logs, title={Logs with zeros? Some problems and solutions}, author={Chen, Jiafeng and Roth, Jonathan}, journal={The Quarterly Journal of Economics}, volume={139}, number={2}, pages={891--936}, year={2024}, publisher={Oxford University Press} }

@article{lin2023expanding, title={Expanding footprints: The impact of passenger transportation on corporate locations}, author={Lin, Yatang and Qin, Yu and Sulaeman, Johan and Yan, Jubo and Zhang, Jialiang}, journal={Review of Finance}, volume={27}, number={3}, pages={1119--1154}, year={2023}, publisher={Oxford University Press} }