Government subsidization and enterprise productivity: A comparative analysis of the steel and photovoltaic industries

Abstract

Government subsidies play a crucial role in optimizing industrial structures, eliminating outdated production capacities, and facilitating industrial transformation and upgrading in traditional industries. This paper is based on data collected from 112 sources, including 26 listed companies in China's steel industry and 30 companies in the photovoltaic sector, during the period from 2019 to 2020. Utilizing the three-stage undesirable output SBM model, we examine the impact of government subsidies on input-output slack and production efficiency. We find that the production efficiency of steel enterprises and photovoltaic enterprises is seriously polarized after considering the undesirable output, and the production efficiency of relatively small enterprises is high for the steel industry. In an unstable economic environment, it is advisable for the government to provide pre-subsidies to steel enterprises to assist them in adjusting resource allocation and effectively responding to unforeseen events. Regardless of the economic conditions, photovoltaic enterprises rely more on post-subsidies to mitigate personnel and technology investment slack. Overall, this study sheds light on the effectiveness of government subsidies in driving efficiency improvements in traditional and emerging industries.

Keywords

• Production efficiency
• Pre-subsidy
• Post-subsidy
• Undesirable output SBM model