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Public vs. Private Ownership of Firms: Evidence from Rural China

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  • Hehui Jin
  • Yingyi Qian
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    Abstract

    November 1997, Revised March 1998 (forthcoming, Quarterly Journal of Economics) Why are many of China's successful rural enterprises publically owned by local communities? Using a set of provincial data, we find that the share of community public firms (Township-Village Enterprises, or TVEs) relative to private enterprises is higher where the central government's influence is greater, the community government's power is stronger, and the level of market development is lower. We also find that TVEs help achieve the community government's goals of increasing government revenue, rural non-farm employment, and rural income. However, TVEs do not increase rural income given the levels of non-farm employment and/or local public goods provision, indicating possible inefficiency as compared to private enterprises. Key Words: Ownership, Township-Village Enterprises, Local Government, Institutions, China

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    Paper provided by Stanford University, Department of Economics in its series Working Papers with number 97047.

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    Handle: RePEc:wop:stanec:97047

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    Keywords: Ownership; Township-Village Enterprises; Local Government; Institutions; China;

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    1. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
    2. Che, Jiahua & Qian, Yingyi, 1998. "Institutional Environment, Community Government, and Corporate Governance: Understanding China's Township-Village Enterprises," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(1), pages 1-23, April.
    3. Weitzman Martin L. & Xu Chenggang, 1994. "Chinese Township-Village Enterprises as Vaguely Defined Cooperatives," Journal of Comparative Economics, Elsevier, vol. 18(2), pages 121-145, April.
    4. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Naughton, Barry, 1994. "Chinese Institutional Innovation and Privatization from Below," American Economic Review, American Economic Association, vol. 84(2), pages 266-70, May.
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    7. Putterman, Louis, 1997. "On the past and future of china's township and village-owned enterprises," World Development, Elsevier, vol. 25(10), pages 1639-1655, October.
    8. Wong, Christine P. W. (ed.), 1997. "Financing Local Government in the People's Republic of China," OUP Catalogue, Oxford University Press, number 9780195900279, September.
    9. Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
    10. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
    11. Caroline Hoxby & M. Daniele Paserman, 1998. "Overidentification Tests with Grouped Data," NBER Technical Working Papers 0223, National Bureau of Economic Research, Inc.
    12. Jiahua Che & Yingyi Qian, . "Insecure Property Rights and Government Ownership of Firms," Working Papers 97050, Stanford University, Department of Economics.
    13. Rozelle Scott & Boisvert Richard N., 1994. "Quantifying Chinese Village Leaders' Multiple Objectives," Journal of Comparative Economics, Elsevier, vol. 18(1), pages 25-45, February.
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