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Reforms and Productivity Dynamics in Chinese State-Owned Enterprises

Author

Listed:
  • McGoldrick, Peter

    () (Trinity College Dublin)

  • Walsh, Patrick Paul

    () (University College Dublin)

Abstract

Institutional change has taken place gradually since 1978 for State-Owned Enterprises (SOEs) in the Industrial Sector of China. In this paper we estimate the effect of deep reform (the right to hire and fire labour, buy and sell capital and operate on international markets) on the productivity dynamics of enterprises. Using a unique balanced panel of 681 SOEs for the period 1980 to 1994, we find consistent production function estimates using an algorithm put forward in Olley and Pakes (1996), which corrects for simultaneity bias. Furthermore, we allow selection to reform to be endogenous, and correct for this selection bias by formulating an entry rule to reform similar to the Olley and Pakes (1996) exit rule. We show that exposure to deep reform have lead to higher productivity realisations while remaining under state ownership.

Suggested Citation

  • McGoldrick, Peter & Walsh, Patrick Paul, 2004. "Reforms and Productivity Dynamics in Chinese State-Owned Enterprises," IZA Discussion Papers 1201, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1201
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    References listed on IDEAS

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    1. Richard Blundell & Stephen Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
    2. Jefferson, Gary H., 1989. "Potential sources of productivity growth within Chinese industry," World Development, Elsevier, vol. 17(1), pages 45-57, January.
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    Cited by:

    1. Marian Rizov & Patrick Paul Walsh, 2005. "Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp98, IIIS.

    More about this item

    Keywords

    selection to reform; simultaneity; production functions; productivity; Chinese Industrial State-Owned Enterprises;

    JEL classification:

    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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