TY - JOUR
T1 - The rise of red private entrepreneurs in China: Policy shift, institutional settings and political connection
AU - Yang, Jin
AU - Huang, Jian
AU - Deng, Yanhua
AU - Bordignon, Massimo
PY - 2020
Y1 - 2020
N2 - This article examines the relationship between the Chinese Communist Party (CCP) membership
and private entrepreneurship in China since 2002, the year when the party revised its constitution
and officially removed ideological discrimination against private entrepreneurs in member recruitment. Drawing on the data from the six waves of a nationwide survey on privately owned
enterprises in China from 1997 to 2008, we find that, while very few private entrepreneurs were
recruited into the CCP during the decade we examine, the constitutional change had encouraged
many party members to enter the private sector. We also show that party members who became
entrepreneurs after the 2002 policy shift tended to be more senior than those who had started their
business before the constitutional change. Furthermore, our difference-in-difference estimation
demonstrates that the phenomenon of party members turning entrepreneurs was more prominent
in regions where the level of marketization was lower, legal protection was less available, and local
governments were prone to more corruption, since political rents were generally larger in environments with weaker market-supporting institutions. This study suggests that party members in
general and especially the elite among them were quick to sense the opportunity and knew how to
translate their political influence into economic power.
AB - This article examines the relationship between the Chinese Communist Party (CCP) membership
and private entrepreneurship in China since 2002, the year when the party revised its constitution
and officially removed ideological discrimination against private entrepreneurs in member recruitment. Drawing on the data from the six waves of a nationwide survey on privately owned
enterprises in China from 1997 to 2008, we find that, while very few private entrepreneurs were
recruited into the CCP during the decade we examine, the constitutional change had encouraged
many party members to enter the private sector. We also show that party members who became
entrepreneurs after the 2002 policy shift tended to be more senior than those who had started their
business before the constitutional change. Furthermore, our difference-in-difference estimation
demonstrates that the phenomenon of party members turning entrepreneurs was more prominent
in regions where the level of marketization was lower, legal protection was less available, and local
governments were prone to more corruption, since political rents were generally larger in environments with weaker market-supporting institutions. This study suggests that party members in
general and especially the elite among them were quick to sense the opportunity and knew how to
translate their political influence into economic power.
KW - Political rent
KW - Political rent
UR - http://hdl.handle.net/10807/180472
U2 - 10.1016/j.chieco.2020.101431
DO - 10.1016/j.chieco.2020.101431
M3 - Article
SN - 1043-951X
VL - 2020
SP - 1
EP - 18
JO - China Economic Review
JF - China Economic Review
ER -