Essays on Empirical Development and Political Economics

The thesis consists of three essays in development and political economics. Political Connection, Government Patronage and Firm Performance: Evidence from Chinese Manufacturing Firms The paper tests whether politically connected firms receive preferential favor from the government, as measured by state capital investment from the central government and subsidies. My results suggest that firms connected with one more top leader from the State Council receive 9.4 percent more subsidies, firms connected with one more leader who holds positions on both the Central Committee and the State Council obtain 23 percent more state capital and then have a 2 percentage point higher product markup. When there is extra state capital due to political connections, other domestic capital is crowded out. The heterogeneous effects find that firms with more employees, but lower sales and less profit tend to receive more state capital if equally connected, while firms with higher sales tend to obtain more subsidies. This additional state capital and these subsidies do not seem to improve the firm's performance. The Determinants of Media Bias in China We measure and investigate the determinants of political control of newspapers in China. We find that more strictly politically controlled newspapers cover disasters and corruption more than their commercial competitors, most likely in order to monitor lower level officials. We also find that they cover leaders and the official news agency Xinhua to a larger extent. We find that in the cross section, the political control correlates negatively with GDP per capita and population size, but there is no time trend in the political control of Chinese newspapers in the 2000s. Finally, we analyze the effect of a reform to close down all county papers in 2003. The reduced competition significantly affected the degree of political control of the remaining papers. Chinese Microblogs and Drug Quality This paper examines the impact of the introduction of Sina Weibo, the most popular microblog in China, on the quality of drugs on the market. I find that the number of bad drugs is decreasing in Sina Weibo use: if the Sina Weibo use is doubled, the number of bad drugs found will be reduced by 21 percent. I show that the reduction of bad drugs is driven by two mechanisms: Sina Weibo induces more effort from the Drug Administration and it deters the production of bad drugs. The results suggest that microblogs can play an important role in monitoring both the public and the private sectors, especially in a context with media censorship