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Autonomy and Incentives in Chinese State Enterprises


  • Theodore Groves
  • Yongmiao Hong
  • John McMillan
  • Barry Naughton


When the responsibility for output decisions was shifted from the state to the firm, and when firms were allowed to retain more of their profits, managers of Chinese state-owned enterprises strengthened workers' incentives. The managers paid more in bonuses and hired more workers on fixed-term contracts. The new incentives were effective: productivity increased with increases in bonus payments and in contract workers. The increase in autonomy raised workers' incomes (but not managers' incomes) and investment in the enterprise, but tended not to raise remittances to the state.

Suggested Citation

  • Theodore Groves & Yongmiao Hong & John McMillan & Barry Naughton, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 183-209.
  • Handle: RePEc:oup:qjecon:v:109:y:1994:i:1:p:183-209.

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