Political connections and trade expansion: Evidence from Chinese private firms Lu Political Connections and Trade Expansion

Abstract

This article, using a 2004 survey of Chinese private firms, empirically studies the impact of political connections (indicated by being a deputy to the Chinese People's Congress) on trade expansion. It is found that political connections lead to an increase of trade expansion. Meanwhile, the expansion into other administrative areas requires a high hierarchical level of political connections, at the corresponding administrative level or above. Furthermore, it is found that political connections affect trade expansion by overcoming insecure property rights institutions and inefficient contracting institutions. © 2011 The Author. Economics of Transition © 2011 The European Bank for Reconstruction and Development.