We examine how hometown ties among local politicians affect capital allocation in China. We use a difference-in-differences design that relies on the exogenous replacements of city officials. Our results indicate that hometown ties between city party secretaries increase city-dyad investment by 10% and firm registrations by 1%. These effects are larger between distant cities and for the investment of small and private firms. Comparing the effects before and after the Chinese anti-corruption campaign, we provide nuanced evidence showing that, although hometown ties may entice the rent-seeking activities of officials, such activities may promote economic growth.
YU LIU ;
XIANGYU SHI ;
The dichotomy of social networks: Politicians’ hometown ties and intercity investment in China （2023年01月19日）http://www.cfrn.com.cn//lw/zbsc/zfzcyjglw/344c2b71a0294044b184e5e8f81826e3.htm