IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v105y2013icp69-76.html
   My bibliography  Save this article

Too many mothers-in-law?

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304387813001016
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. J. Kornai & E. Maskin & G. Roland., 2004. "Understanding the Soft Budget Constraint," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 12.
    2. Lin, Justin Yifu & Cai, Fang & Li, Zhou, 1998. "Competition, Policy Burdens, and State-Owned Enterprise Reform," American Economic Review, American Economic Association, vol. 88(2), pages 422-427, May.
    3. Brueckner, Jan K., 2009. "Partial fiscal decentralization," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 23-32, January.
    4. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-1162, December.
    5. Yingyi Qian & Chenggang Xu, 1993. "Why China's economic reforms differ: the M-form hierarchy and entry/expansion of the non-state sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(2), pages 135-170, June.
    6. Andrei Shleifer & Robert W. Vishny, 1993. "Corruption," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 599-617.
    7. M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 541-555.
    8. Guofu Tan & Justin Yifu Lin, 1999. "Policy Burdens, Accountability, and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 426-431, May.
    9. Marcelin Joanis, 2008. "Intertwined Federalism: Accountability Problems under Partial Decentralization," Cahiers de recherche 08-22, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    10. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June.
    11. Junaid Ahmad & Shantayanan Devarajan & Stuti Khemani & Shekhar Shah, 2006. "Decentralization and Service Delivery," Chapters,in: Handbook of Fiscal Federalism, chapter 10 Edward Elgar Publishing.
    12. Yingyi Qian & Gerard Roland & Chenggang Xu, 2006. "Coordination and Experimentation in M-Form and U-Form Organizations," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 366-402, April.
    13. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
    14. Shantayanan Devarajan & Stuti Khemani & Shekhar Shah, 2009. "The Politics of Partial Decentralization," Chapters,in: Does Decentralization Enhance Service Delivery and Poverty Reduction?, chapter 5 Edward Elgar Publishing.
    15. Lin, Justin Yifu & Li, Zhiyun, 2008. "Policy burden, privatization and soft budget constraint," Journal of Comparative Economics, Elsevier, vol. 36(1), pages 90-102, March.
    16. Qian, Yingyi, 1994. "A Theory of Shortage in Socialist Economies Based on the "Soft Budget Constraint."," American Economic Review, American Economic Association, vol. 84(1), pages 145-156, March.
    17. Stoyan Tenev & Chunlin Zhang & Loup Brefort, 2002. "Corporate Governance and Enterprise Reform in China : Building the Institutions of Modern Markets," World Bank Publications, The World Bank, number 15237, June.
    18. Pei Sun, 2007. "Is the state-led industrial restructuring effective in transition China? Evidence from the steel sector," Cambridge Journal of Economics, Oxford University Press, vol. 31(4), pages 601-624, July.
    19. Jiahua Che & Yingyi Qian, 1998. "Insecure Property Rights and Government Ownership of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 467-496.
    20. SIQUEIRA, Kevin & SANDLER, Todd & CAULEY, Jon, 2009. "Common agency and state-owned enterprise reform," China Economic Review, Elsevier, vol. 20(2), pages 208-217, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Government predation; Policy burden; State-owned enterprises; Transitional economies;

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:105:y:2013:i:c:p:69-76. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/devec .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.