Regional Economic Competition, Fiscal Subsidies, and Overcapacity

Weijia Chen, Wen Gong, Zhou Jiang, Peizhen Jin

Source Title: Journal of Global Information Management (JGIM)30(6)

ISSN: 1062-7375|EISSN: 1533-7995|EISBN13: 9781668425206|DOI: 10.4018/JGIM.313410

MLA

Chen, Weijia, et al. "Regional Economic Competition, Fiscal Subsidies, and Overcapacity." JGIM vol.30, no.6 2022: pp.1-19. http://doi.org/10.4018/JGIM.313410

APA

Chen, W., Gong, W., Jiang, Z., & Jin, P. (2022). Regional Economic Competition, Fiscal Subsidies, and Overcapacity. Journal of Global Information Management (JGIM), 30(6), 1-19. http://doi.org/10.4018/JGIM.313410

Chicago

Chen, Weijia, et al. "Regional Economic Competition, Fiscal Subsidies, and Overcapacity," Journal of Global Information Management (JGIM) 30, no.6: 1-19. http://doi.org/10.4018/JGIM.313410

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Abstract

Promotion tournaments theory and regional economic competition can be used to explain China's overcapacity. This study used the non-radial distance function to evaluate the overcapacity considering resource and environmental pollution, combined with Chinese industrial enterprise data, to evaluate the fiscal subsidies and their impact on regional industrial capacity. Empirical evidence based on provincial panel data shows that to strive for more foreign investment, local governments tend to increase fiscal subsidies to industrial enterprises and inhibit capacity utilization, but the technology diffusion and competitive effect of foreign investment can also weaken this adverse effect. The heterogeneity analysis based on geographical location shows that the fiscal subsidies to industrial enterprises weaken the improvement effect of economic competition on capacity utilization in coastal cities, but there is no such impact in inland cities. Reducing the government's excessive intervention and promoting orderly competition are essential to eliminating overcapacity.