Allocative implications of government investment in private sector

• 成果类型: Article
• 署名作者: Lian, Lili; Zhang, Jingyi
• 署名单位: Shanghai University of Finance & Economics; Peking University Shenzhen Graduate School (PKU Shenzhen); Peking University
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2025.103616
• 发表日期: 2026
• 关键词: Government investment; resource allocation; financial friction; Interest-rate liberalization; Loan-to-value ratio

摘要

In China, state owners make minority equity investments in private firms. We study the allocative implications of such government investments using a two-sector DSGE model with financial friction and idiosyncratic productivities. In our model, private owners are more productive than state owners but face tighter financial constraints. Equity investment by a state owner alleviates the private owner's financial constraint but dampens its own productivity, consistent with Chinese firm-level data. Under this setup, only private owners with sufficiently high productivity accept such investment, while only state owners with sufficiently low productivity make such investment. As a result, expansion of such government investment improves capital allocation within each sector and across sectors. Our analysis shows that financial liberalizations, including liberalizing interest-rate controls and reducing the loan-to-value gap between sectors, stimulate private owners' demand for such government investment but discourage state owners from making it, thus generating an ambiguous effect on aggregate productivity.