Short-Term Pain, Long-Term Stain: Political Trust after Privatization of State-Owned Enterprises in China

Mass opposition to governments implementing economic liberalization reforms remains a key puzzle in the political economy of transitions. This article investigates this puzzle by examining the political consequences of China’s large-scale privatization of state-owned enterprises in the late 1990s, which displaced over forty million workers while enriching politically connected elites. Combining firm-level layoff data with nationally representative surveys, we find that citizens in counties experiencing greater privatization layoffs exhibit persistently lower political trust and more contentious behavior more than a decade after the peak of privatization. This trust deficit does not dissipate even among laid-off workers whose material conditions substantially improved during China’s subsequent economic boom. Further analyses show that elite capture, social contract violation, and sociotropic anxiety jointly sustained this distrust. Short-term pain from economic reform can leave a lasting stain on political trust–even when the promised growth materializes.