How does political power influence resource allocation, evidence from NSF grant in China

Abstract

We study how political power affects resource allocation for knowledge production dictated by central planning in a non-market system. Our empirical results suggest that scholar with political privilege is associated with 15.7% more allocation granted by the National Natural Science Foundation of China (NSFC), especially towards applicants with high political hierarchy. Weaker institutional environment, less reputable universities and hard-to-value project determine variations in grant allocation related to political privilege. Our empirical results also suggest that high political hierarchy scholar shows political concern and do not enjoy significant favoritism in grant allocation under a more transparency environment. Further analysis suggest that access to NSFC fund not only benefits individual official scholar in research quality, but also more high-impact publications for the institute than fellows without political background, indicating that moderate political favoritism in resource allocation finally produce positive externality effect to knowledge production.