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Adjustment of State Owned and Foreign-Funded Enterprises in China to economic reforms,1980s-2007: a logistic smooth transition regression (LSTR) approach

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  • Aizenman, Joshua
  • Geng, Nan

Abstract

This paper applies a logistic smooth transition regression approach to the estimation of a homogenous aggregate value added production function of the State Owned (SOE) and Foreign-Funded Enterprises (FFE) in China, 1980s-2007. The transition associated with the eco- nomic reforms in China is estimated applying a curvilinear logistic function, where the speed and the timing of the transition are endoge- nously determined by the data. We ï¬nd high but gradually declining markups in both SOEs and FFEs during the early stages of the ad- justment, with SOEs having a much larger scale and market size than the FFEs. However, over the transition process, returns to scale in industrial SOEs dropped sharply. For both FFEs and SOEs the tran- sition is slow, with a midpoint about 7 and 14 years, respectively. We ï¬nd signiï¬cant increase of TFP growth rate for both FFEs and SOEs, by 0.1436 and 0.1971, respectively.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Cruz in its series Santa Cruz Department of Economics, Working Paper Series with number qt7919w74z.

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Date of creation: 01 May 2009
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Handle: RePEc:cdl:ucscec:qt7919w74z

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Keywords: smooth transition regression; homogenous aggregate value;

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  1. World Bank, 2001. "Finance for Growth : Policy Choices in a Volatile World," World Bank Publications, The World Bank, The World Bank, number 13895, February.
  2. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 921-47, October.
  3. Fouquau, Julien & Hurlin, Christophe & Rabaud, Isabelle, 2008. "The Feldstein-Horioka puzzle: A panel smooth transition regression approach," Economic Modelling, Elsevier, Elsevier, vol. 25(2), pages 284-299, March.
  4. Caprio, Gerard & Honohan, Patrick, 2001. "Finance for Growth: Policy Choices in a Volatile World," MPRA Paper, University Library of Munich, Germany 9929, University Library of Munich, Germany.
  5. González, Andrés & Teräsvirta, Timo & van Dijk, Dick, 2005. "Panel Smooth Transition Regression Models," Working Paper Series in Economics and Finance, Stockholm School of Economics 604, Stockholm School of Economics.
  6. Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, Elsevier, vol. 62(2), pages 211-228, June.
  7. Pravin Krishna & Devashish Mitra, . "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence From India," Working Papers, Brown University, Department of Economics 96-8, Brown University, Department of Economics.
  8. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, Elsevier, vol. 36(1-2), pages 53-73, February.
  9. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, Biometrika Trust, vol. 89(2), pages 484-489, June.
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Cited by:
  1. Geng, Nan, 2011. "The dynamics of market structure and firm-level adjustment to India's pro-market economic liberalizing reforms, 1988-2006: A Time Varying Panel Smooth Transition Regression (TV-PSTR) approach," International Review of Economics & Finance, Elsevier, Elsevier, vol. 20(4), pages 506-519, October.

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