Soft Budget Constraints in China: Evidence from the Guangdong Hospital Industry
Using data from 276 general acute hospitals in the Pearl River Delta region of Guangdong Province from 2002 and 2004, we construct a preliminary metric of budget constraint softness. We find that, controlling for hospital size, ownership, and other factors, a Chinese hospital’s probability of receiving government financial support is inversely associated with the hospital’s previous net revenue, an association consistent with soft budget constraints.
FSI researchers consider international development from a variety of angles. They analyze ideas such as how public action and good governance are cornerstones of economic prosperity in Mexico and how investments in high school education will improve China’s economy.