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Government Subsidy, Market Entry and Enterprise Profits: Technical Effect and Anticompetitive Effect of Government Subsidy

XU Zhi-wei;GUO Shu-long;Tianjin University of Finance and Economics;  
Based on a simultaneous equation model, this articl e analyses the relationship among the government subsidy,market entry and enterprise profits. And on this basis, it examines the technical effect and anticompetitive effect that may be brought forward by government subsidy. The findings indicate that due to the influence of the "poverty relief" subsidy and the "door-to-door subsidy" entry, in most cases the government subsidy has worsened the profit performance of the incumbent enterprises, which are caught in the vicious circle of "more lose more subsidy, more subsidy more lose". Even if the profits of the incumbent enterprises can be improved by the high-intensive government subsidy, it mainly attributes to the high administrative barriers?limiting the market entry of the potential enterprises, not to the technical progress. Under almost all the subsidy strength,the higher administrative entry barriers and discriminatory choice of the subsidy objects make government subsidy have a relatively strong anticompetitive effect, thus the technical effect has never been given a full play.
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