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Abstract

This paper explores a new consequence of state power expansion in authoritarian regimes: drawing talent from society into the regime. We analyze the effect of China’s recent value-added tax (VAT) reform on citizens’ preferences for state employment, particularly through the National Civil Servant Exam. Using a difference-in-differences approach that exploits pre-reform subnational tax composition variations and a dataset of 166,000 government job posts from 2010 to 2021, we find that the VAT reform has attracted more and better-qualified individuals to tax-related state positions, especially those offering greater power and graft opportunities. Surveys show exam takers perceive increased power and benefits in tax agencies post-reform, and they likely come from the private sector. In sum, our research indicates that state power expansion significantly influences talent distribution between the state and society in authoritarian settings.