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Do institutions not matter in China? Evidence from manufacturing enterprises

Author

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  • Lu, Yi
  • Png, Ivan P.L.
  • Tao, Zhigang

Abstract

This study addresses the apparent puzzle that China achieved spectacular economic performance despite weak institutions. Using a World Bank survey of 1566 manufacturing enterprises in 18 Chinese cities, we investigated whether property rights protection mattered for enterprise performance. We found that property rights protection had a positive and statistically significant impact on enterprise productivity. Two-step GMM estimation and heterogeneous response estimation further established the causal impacts of property rights protection on enterprise productivity. These findings were robust to various controls, exclusion of outliers, and alternative measures of productivity and property rights protection.

Suggested Citation

  • Lu, Yi & Png, Ivan P.L. & Tao, Zhigang, 2013. "Do institutions not matter in China? Evidence from manufacturing enterprises," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 74-90.
  • Handle: RePEc:eee:jcecon:v:41:y:2013:i:1:p:74-90
    DOI: 10.1016/j.jce.2011.11.002
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    Cited by:

    1. Raffaela Giordano & Sergi Lanau & Pietro Tommasino & Petia Topalova, 2015. "Does Public Sector Inefficiency Constrain Firm Productivity; Evidence from Italian Provinces," IMF Working Papers 15/168, International Monetary Fund.
    2. repec:eee:iburev:v:26:y:2017:i:3:p:555-565 is not listed on IDEAS
    3. Feenstra, Robert C. & Hong, Chang & Ma, Hong & Spencer, Barbara J., 2013. "Contractual versus non-contractual trade: The role of institutions in China," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 281-294.
    4. Hornstein, Abigail S., 2014. "The impact of local governance institutions on foreign market listings: The case of Chinese firms," China Economic Review, Elsevier, vol. 29(C), pages 46-67.
    5. Du, Julan & Lu, Yi & Tao, Zhigang, 2015. "Government expropriation and Chinese-style firm diversification," Journal of Comparative Economics, Elsevier, vol. 43(1), pages 155-169.
    6. Shuxing Shi & Kunming Huang & Dezhu Ye & Linhui Yu, 2014. "Culture and regional economic development: Evidence from China," Papers in Regional Science, Wiley Blackwell, vol. 93(2), pages 281-299, June.
    7. Eberhardt, Markus & Wang, Zheng & Yu, Zhihong, 2016. "From one to many central plans: Drug advertising inspections and intra-national protectionism in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 608-622.
    8. Ng, Travis & Yu, Linhui, 2014. "Which types of institutions hinder productivity among private manufacturing firms in China?," China Economic Review, Elsevier, vol. 31(C), pages 17-31.
    9. repec:bla:etrans:v:25:y:2017:i:3:p:495-525 is not listed on IDEAS
    10. Li, Xibao, 2015. "Specialization, institutions and innovation within China's regional innovation systems," Technological Forecasting and Social Change, Elsevier, vol. 100(C), pages 130-139.
    11. Du, Julan & Lu, Yi & Tao, Zhigang, 2014. "The role of the state in resolving business disputes in China," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 940-953.
    12. repec:ana:journl:v:3:y:2017:i:2:p:3-24 is not listed on IDEAS

    More about this item

    Keywords

    Institutions; Property rights; Productivity; External dependence; Entry barriers;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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