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Too many mothers-in-law?

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  • Cheng, Yuk-Shing
  • Chung, Kim-Sau

Abstract

Developing countries with low tax capacity may rely on predation to finance government functions. Government predation, in turn, is often accused of imposing a choking effect on state-owned enterprises (SOEs), contributing to the latter's poor performance. We formalize this choking effect as a problem of inefficient predation that arises from time inconsistency, and show that having multiple government bodies supervising the same SOE may mitigate this problem. Our theory provides an efficiency rationale for the Chinese style of decentralization before 1978, and challenges the wisdom of China's recent enterprise reform that attempted to consolidate supervisory power.

Suggested Citation

  • Cheng, Yuk-Shing & Chung, Kim-Sau, 2013. "Too many mothers-in-law?," Journal of Development Economics, Elsevier, vol. 105(C), pages 69-76.
    • Handle: RePEc:eee:deveco:v:105:y:2013:i:c:p:69-76
    DOI: 10.1016/j.jdeveco.2013.07.002
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    More about this item

    Keywords

    Government predation; Policy burden; State-owned enterprises; Transitional economies;
    All these keywords.

    JEL classification:

    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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