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Reform and Competitive Selection in China: An Analysis of Firm Exits

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  • Qing Gong Yang

    (New Zealand Commerce Commission)

  • Paul Temple

    (University of Surrey)

Abstract

This paper considers aspects of the competitive selection process in China - firm entry, survival, and exit - in an important sector of manufacturing, looking in particular for changes resulting from the latest stage of reforms. Using industry survey data from a province in North-East China, we find substantial differences in the process between ownership types. By conducting a simple decomposition of the aggregate productivity growth and exploring the determinants of firm’s exit using a hazard rate model, we observe a substantial rate of churning of enterprises in the sector, and find that the competitive selection processes operate, for small and collectively owned enterprises (COEs), in a manner consistent with a private market economy. In contrast, such processes appear not to be functioning for state owned enterprises (SOEs). We conclude that competitive selection in China is not providing a sufficiently strong substitute for corporate governance based on ownership.

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Bibliographic Info

Paper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0409.

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Length: 37 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:sur:surrec:0409

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Keywords: Competition; Exit; Productivity; Hazard Models;

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Cited by:
  1. Spaliara, Marina-Eliza & Tsoukas, Serafeim, 2013. "What matters for corporate failures in Asia? Exploring the role of firm-specific characteristics during the Asian crisis," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 83-96.

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