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The Role of the State in Making a Market Economy

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  • Victor Nee

Abstract

This paper highlights the crucial role of the state in establishing a market economy, through an analysis of the early stages of market-oriented reforms in China. China followed an evolutionary approach to economic reform that has relied on the preexisting state to oversee the construction of a market economy. Trial-and-error problem solving in the formative stages of market transition led the central state inexorably to oversee institutional changes to establish a modern legal-rational bureaucracy. Although the state remains structurally vulnerable to rent seeking, it gained the organizational capacity to institute and enforce rules critical to the emergence of a hybrid market economy.

Suggested Citation

  • Victor Nee, 2000. "The Role of the State in Making a Market Economy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(1), pages 1-64, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200003)156:1_64:trotsi_2.0.tx_2-1
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    Citations

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    Cited by:

    1. Barbara Krug & Hans Hendrischke, 2012. "Market design in Chinese market places," Asia Pacific Journal of Management, Springer, vol. 29(3), pages 525-546, September.
    2. Brousseau, Eric & Schemeil, Yves & Sgard, Jérôme, 2010. "Bargaining on law and bureaucracies: A constitutional theory of development," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 253-266, September.
    3. Colombatto Enrico, 2001. "Was Transition about Free-Market Economics?," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 11(1), pages 1-16, March.
    4. Lisa Keister, 2009. "Organizational research on market transition: A sociological approach," Asia Pacific Journal of Management, Springer, vol. 26(4), pages 719-742, December.
    5. repec:spo:wpecon:info:hdl:2441/4vc7skecu3q7u7s984pgpg64m is not listed on IDEAS
    6. Krug, B. & Hendrischke, H., 2001. "The Emergence of a Private Business Sector in China," ERIM Report Series Research in Management ERS-2001-03-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. Krug, B. & Hendrischke, H., 2006. "Institution Building and Change in China," ERIM Report Series Research in Management ERS-2006-008-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    8. Krug, B. & Hendrischke, H., 2002. "Entrepreneurship in China: Institutions, organisational identity and survival: empirical results from two provinces," ERIM Report Series Research in Management ERS-2002-14-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    9. Wubiao Zhou, 2014. "Regional institutional development, political connections, and entrepreneurial performance in China’s transition economy," Small Business Economics, Springer, vol. 43(1), pages 161-181, June.
    10. repec:hal:spmain:info:hdl:2441/4vc7skecu3q7u7s984pgpg64m is not listed on IDEAS
    11. Krug, B. & Polos, L., 2000. "The Strawberry Growth Underneath the Nettle: the emergence of entrepreneurs in China," ERIM Report Series Research in Management ERS-2000-34-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Khor, Niny & Pencavel, John, 2008. "Measuring Income Mobility, Income Inequality, and Social Welfare for Households of the People’s Republic of China," ADB Economics Working Paper Series 145, Asian Development Bank.
    13. Mario A. González-Corzo, 2018. "Principal Elements of Agricultural Reforms in Transition Economies: Implications For Cuba?," Annual Proceedings, The Association for the Study of the Cuban Economy, vol. 28.
    14. Krug, B. & Zhu, Z. & Hendrischke, H., 2004. "China’s emerging tax regime: Devolution, fiscal federalism, or tax farming?," ERIM Report Series Research in Management ERS-2004-113-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    15. Weede Erich, 2001. "Comparative Economic Performance in China and India," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 11(1), pages 1-17, March.
    16. Wubiao Zhou, 2010. "The role of the state in making a national market," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 2(3), pages 276-297, September.
    17. Krug, B., 2006. "Enterprise Ground Zero in China," ERIM Report Series Research in Management ERS-2006-024-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    18. Mai, Nhat Chi, 2012. "FROM BUREAUPRENEUR TO HNWI: CHANGES AND EMERGENCE OF HIGH NET WORTH INDIVIDUALS (HNWIs) IN CHINA," OSF Preprints jhrqv, Center for Open Science.
    19. repec:hal:wpspec:info:hdl:2441/4vc7skecu3q7u7s984pgpg64m is not listed on IDEAS
    20. Victor Nee & Sonja Opper, 2009. "Bureaucracy and Financial Markets," Kyklos, Wiley Blackwell, vol. 62(2), pages 293-315, April.
    21. Patrick Hamm & David Stuckler & Lawrence King, 2010. "The Governance Grenade: Mass Privatization, State Capacity and Economic Growth in Post-communist Countries," Working Papers wp222, Political Economy Research Institute, University of Massachusetts at Amherst.
    22. Anderson, Hamish D. & Chi, Jing & Wang, Qing (Sophie), 2017. "Political ties and VC exits: Evidence from China," China Economic Review, Elsevier, vol. 44(C), pages 48-66.
    23. Lotta Moberg & Vlad Tarko, 2021. "Special economic zones and liberalization avalanches," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 10(1), pages 120-139, February.
    24. Krug, B. & Hendrischke, H., 2001. "China Incorporated," ERIM Report Series Research in Management ERS-2001-81-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    25. Krug, B. & Belschak, F.D., 2001. "Combining Commerce and Culture," ERIM Report Series Research in Management ERS-2001-84-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

    More about this item

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • P0 - Political Economy and Comparative Economic Systems - - General

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