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Abstract
This paper identifies a new consequence of state power expansion—attracting talent from society to the regime. We examine the impacts of China’s recent value-added tax (VAT) reform—an effort of state building—on citizens’ preferences for state employment through participating in the National Civil Servant Exam (NCSE). Using a difference-in-differences strategy that exploits subnational variations in pre-reform tax composition and a novel dataset of 151,529 government positions from 2010 to 2021, we show that the VAT reform attracted more and higher-quality talent to tax-related state agencies. Evidence from six waves of the Chinese General Social Survey suggests that the talent attracted to civil servant jobs is more likely from non-state sectors. We further find that the VAT reform increased local budgetary revenues and state wages, implying that the talent is likely attracted by improvements in the material benefits of government jobs after the reform, including but not limited to wage compensations. Overall, our findings suggest that talent reallocation may be one reason why authoritarian regimes expand the power of the state, sometimes even at the cost of the private sector.