Government-led resource allocation and firm productivity: Evidence from a quasi-natural experiment

Abstract

We examine the effect of a government-led reform on firm productivity. This reform aimed to establish a comprehensive evaluation system to guide the allocation of resources. Using a stacked difference-in-differences estimate, we document the following results. First, the reform improves firm productivity by 1.8 %. Second, the effect of the reform is more pronounced among smaller firms and firms operating in less competitive industries. Third, the reform enhances the efficiency of resource allocation and utilization. Our study informs policymakers about the effectiveness of government participation in resource allocation.